-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CSVreQ7HybJc4okbV+kQ6pw4WRpyI88lJE3VU62hBlQJIqiQccsHU7VVbE3AUDH9 y8Lkeg2PK4TMQmoWqpJhkg== 0001026777-98-000075.txt : 19980902 0001026777-98-000075.hdr.sgml : 19980902 ACCESSION NUMBER: 0001026777-98-000075 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 30 FILED AS OF DATE: 19980901 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IT PARTNERS INC CENTRAL INDEX KEY: 0001067670 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 522056858 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-61107 FILM NUMBER: 98702543 BUSINESS ADDRESS: STREET 1: 9881 BROKEN LAND PARKWAY SUITE 102 CITY: COLUMBIA STATE: MD ZIP: 21046 BUSINESS PHONE: 4103099800 MAIL ADDRESS: STREET 1: 9881 BROKEN LAND PARKWAY SUITE 102 CITY: COLUMBIA STATE: MD ZIP: 21046 S-1/A 1 PRE-EFFECTIVE AMENDMENT NO. 1 TO FORM S-1 REGISTRATION STATEMENT AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 1, 1998. REGISTRATION STATEMENT NO. 333-61107 ============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- IT PARTNERS, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 7371 52-2056858 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification Number)
9881 BROKEN LAND PARKWAY, SUITE 102 DANIEL J. KLEIN COLUMBIA, MARYLAND 21046 CHIEF EXECUTIVE OFFICER (410) 309-9800 IT PARTNERS, INC. (Address, including zip code, and 9881 BROKEN LAND PARKWAY, SUITE 102 telephone number, including area code, COLUMBIA, MARYLAND 21046 of registrant's principal executive offices) TELEPHONE (410) 309-9800 FACSIMILE (410) 309-9801 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copies to: MORRIS F. DEFEO, JR., ESQ. GEORGE P. STAMAS, ESQ. SWIDLER BERLIN SHEREFF WILMER, CUTLER & PICKERING FRIEDMAN, LLP 2445 M STREET, N.W. 3000 K STREET, N.W., SUITE 300 WASHINGTON, D.C. 20037-1420 WASHINGTON, D.C. 20007 TELEPHONE (202) 663-6000 TELEPHONE (202) 424-7500 FACSIMILE (202) 663-6363 FACSIMILE (202) 424-7647 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: [ ] ---------------- CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------- Title of Amount Proposed Maximum Proposed Maximum Amount of Shares to be to be Offering Price Aggregate Offering Registration Registered Registered Per Unit(1) Price Fee - -------------------------------------------------------------------------------------- Common Stock, $.01 par value 6,900,000 $ 16.00 $110,400,000 $32,568* - --------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457(c) under the Securities Act of 1933. *Previously paid THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The table below sets forth the expenses to be incurred by the Company in connection with the issuance and distribution of the shares registered for offer and sale hereby, other than underwriting discounts and commissions. All amounts shown represent estimates except the Securities Act registration fee. Registration fee under the Securities Act of 1933. ......... $32,568 Printing and EDGAR expenses. ............................... * Registrar and Transfer Agent's fees and expenses. .......... * Accountants' fees and expenses. ............................ * Legal fees and expenses. ................................... * ------- Total. ..................................................... $ * - ---------- * To be completed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company's Certificate of Incorporation and By-Laws provide, to the maximum extent provided by applicable law, that a director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended. Any repeal or modification of the relevant Article of By-Laws of the Company shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. Each person who was or is made a party or is threatened to be made a party to or is or was involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or a person of whom he is the legal representative is or was a director, officer or employee of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties, and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his heirs, executors, and administrators; provided, however, that except as provided in the Company's By-Laws with respect to proceedings seeking to enforce rights to indemnification, the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company. The right to indemnification conferred in the Company's By-Laws shall be a contract right and shall include the right to be paid by the Company the II-1 expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Company of an undertaking by or on behalf of such director of officer, to repay all amounts so advanced if it shall ultimately be determined that such director of officer is not entitled to be indemnified. The Company may purchase and maintain insurance to protect itself and any such director, officer or other person against any liability asserted against him and incurred by him in respect of such service whether or not the Company would have the power to indemnify him against such liability by law or under the provisions of the Company's By-Laws. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. The following paragraphs of this Item 15 describe all sales of securities by the Company within the past three years which were not registered under the Securities Act of 1933. On May 29, 1997, the Company issued 194,691 shares of Common Stock to Martin G. Kandl and Haeyoung Kandl jointly for the aggregate consideration of $1,328,175. On May 30, 1997, the Company issued 50,000 shares of Series A Preferred and Equity Warrants to purchase 137,380 shares of either Common Stock or Series B Preferred to Creditanstalt for the aggregate consideration of $500,000. On May 30, 1997, the Company issued 100,000 shares of Series A Preferred and Equity Warrants to purchase 274,760 shares of either Common Stock or Series B Preferred to FF-ITP for the aggregate consideration of $1,000,000. On May 30, 1997, the Company issued 10,900 shares of Series A Preferred to Daniel J. Klein for the aggregate consideration of $109,000. On May 30, 1997, the Company issued 10,900 shares of Series A Preferred to Jamie E. Blech for the aggregate consideration for $109,000. On May 30, 1997, the Company issued 293,075 shares of Common Stock to Daniel J. Klein for nominal consideration in connection with the formation of the Company. On May 30, 1997, the Company issued 293,075 shares of Common Stock to Jamie E. Blech for nominal consideration in connection with the formation of the Company. On May 30, 1997, the Company issued 26,638 shares of Common Stock to Mark F. Yanson for nominal consideration in connection with the formation of the Company. On May 30, 1997, the Company issued 165,680 shares of Common Stock to the shareholders of CNS for the aggregate consideration of $1,554,905. On May 30, 1997, the Company issued Debt Warrants to purchase 219,808 shares of Common Stock or Series B Preferred to Creditanstalt for nominal consideration in connection with the execution of the Credit Facility. On June 30, 1997, the Company issued 495,260 shares of Common Stock to Christopher R. Corbett and Merrie Corbett jointly for the aggregate consideration of $4,648,015. On July 11, 1997, the Company issued 23,334 shares of Series A Preferred and Equity Warrants to purchase 64,110 shares of either Common Stock of Series B Preferred to Creditanstalt for the aggregate consideration of $233,340. On October 20, 1997, the Company issued 393,040 shares of Common Stock to shareholders of FSC for the aggregate consideration of $3,910,000. II-2 On October 27, 1997, the Company issued 26,666 shares of Series A Preferred and Equity Warrants to purchase 41,934 shares of either Common Stock of Series B Preferred to Creditanstalt for the aggregate consideration of $266,660. On October 31, 1997, the Company issued 10,000 shares of Series A Preferred to FF-ITP for the aggregate consideration of $100,000. On October 31, 1997, the Company issued 15,725 shares of Common Stock to Christopher R. Corbett and Merrie Corbett jointly for the aggregate consideration of $100,000. On October 31, 1997, the Company issued 15,725 shares of Common Stock to FF-ITP for the aggregate consideration of $100,000. On October 31, 1997, the Company issued 7,863 shares of Common Stock to Martin G. Kandl and Haeyoung Kandl jointly for the aggregate consideration of $50,000. On October 31, 1997, the Company issued 533 shares of Common Stock to Thomas Gardner for the aggregate consideration of $3,393. On October 31, 1997, the Company issued 38,053 shares of Common Stock to shareholders of CNS for the aggregate consideration of $357,130. On January 7, 1998, the Company issued 100,000 shares of Series A Preferred and Equity Warrants to purchase 100,522 shares of either Common Stock or Series B Preferred to Creditanstalt for the aggregate consideration of $1,000,000. On January 7, 1998, the Company issued 222,222 shares of Series B Preferred to Creditanstalt for the aggregate consideration of $1,000,000. On January 7, 1998, the Company issued Debt Warrants to purchase 106,553 shares of Common Stock or Series B Preferred to Creditanstalt for nominal consideration in connection with the execution of the Credit Facility. On January 8, 1998, the Company issued 1,191,416 shares of Common Stock to 17 shareholders of Sequoia for the aggregate consideration of $11,852,326. On February 5, 1998, the Company issued 700,636 shares of Common Stock to the shareholders of Incline for the aggregate consideration of $6,969,998. On March 31, 1998, the Company issued 345,204 shares of Series B Preferred to Wachovia for the aggregate consideration of $3,000,000. On March 31, 1998, the Company issued 230,136 shares of Series B Preferred to Indosuez IT Partners for the aggregate consideration of $2,000,000. On April 30, 1998, the Company issued Equity Warrants to purchase 8,544 shares of either Common Stock or Series B Preferred to Creditanstalt in the form of a PIK Dividend on the outstanding Equity Warrants. On April 30, 1998, the Company issued Equity Warrants to purchase 8,960 shares of either Common Stock or Series B Preferred to FF-ITP in the form of a PIK Dividend on the outstanding Equity Warrants. On April 30, 1998, the Company issued 7,569 shares of Series A Preferred to Creditanstalt in the form of a PIK Dividend. On April 30, 1998, the Company issued 6,525 shares of Series A Preferred to FF-ITP in the form of a PIK Dividend. On April 30, 1998, the Company issued 668 shares of Series A Preferred to Daniel J. Klein in the form of a PIK Dividend. On April 30, 1998, the Company issued 668 shares of Series A Preferred to Jamie E. Blech in the form of a PIK Dividend. On May 1, 1998, the Company issued 45,452 shares of Series B Preferred to Indosuez IT Partners II for the aggregate consideration of $400,000. On May 11, 1998, the Company issued 267,433 shares of Common Stock to the shareholders of Sequoia for the aggregate consideration of $2,660,446. On May 13, 1998, the Company issued 312,270 shares of Common Stock to Stanton L. Call for the aggregate consideration of $3,340,947. On June 1, 1998, the Company issued 4,151 shares of Series A Preferred to Creditanstalt in the form of a PIK Dividend. On June 1, 1998, the Company issued 2,330 shares of Series A Preferred to FF-ITP in the form of a PIK Dividend. On June 1, 1998, the Company issued 231 shares of Series A Preferred to Daniel J. Klein in the form of a PIK Dividend. II-3 On July 28, 1998, the Company issued 700 shares of Series C Preferred to BDC for the aggregate consideration of $7,000,000. On August 4, 1998, the Company issued 300 shares of Series C Preferred to Wachovia for the aggregate consideration of $3,000,000. On June 1, 1998, the Company issued 231 shares of Series A Preferred to Jamie E. Blech in the form of a PIK Dividend. Amended 1997 Long-Term Incentive Plan. See "Management--Stock Option Plan," which is incorporated by reference herein from the Prospectus included in Part I of this Registration Statement. Issuance of Warrants. See "The Recapitalization--Warrant Agreement and Debt Warrants" and "The Recapitalization--Purchase Agreement and Equity Warrants," which is incorporated by reference herein from the Prospectus included in Part I of this Registration Statement. Each issuance of securities described above was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act as a transaction by an issuer not including any public offering. The issuance of the PIK Dividends was made in reliance on the exemption from registration provided by Rule 416 of Regulation C promulgated by the SEC. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transactions. All recipients had adequate access, through their relationships with the Company, to information about the Company. II-4 ITEM 16(A). EXHIBITS. EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------------- *1.1 Form of Underwriting Agreement. *3.1 Certificate of Incorporation, as amended. *3.2 By-Laws, as amended. *4.1 Specimen Common Stock Certificate. 4.2 Amended and Restated Warrant Agreement dated December 16, 1997, as amended. 4.3 Amended and Restated Stockholder Agreement dated March 31, 1998, as amended. 4.4 Preferred Stock and Warrant Purchase Agreement dated May 30, 1997, as amended. 4.5 Promissory Note from IT Partners to Stanton L. Call dated May 13, 1998 in the original principal amount of $2,876,206, convertible into Common Stock. 4.6 Convertible Promissory Note from IT Partners to Servinet dated June 10, 1998, with any unpaid principal amount outstanding convertible at Servinet's option into Common Stock. 4.10 12.0% Series C Senior Redeemable Preferred Stock Purchase Agreement dated July 28, 1998, between IT Partners and FBR Business Development Capital. 4.11 Certificate of Designation of Preferences and Rights of 12.0% Series C Redeemable Preferred Stock of IT Partners, dated July 28, 1998. 4.12 12.0% Series C Senior Redeemable Preferred Stock Purchase Agreement dated July 31, 1998, between IT Partners and Wachovia Capital Associates, Inc. **5.1 Opinion of Swidler Berlin Shereff Friedman, LLP. 10.1 Asset Purchase Agreement between IT Partners and Servinet, dated June 10, 1998. 10.2 Asset Purchase Agreement between IT Partners and Stanton L. Call, dated May 13, 1998. 10.3 Business Combination Agreement among IT Partners, ITP Acquisition Corp., A-COM, Christopher Corbett and Merrie Corbett, dated June 30, 1997. 10.4 Business Combination Agreement among IT Partners, CNS, Stanley Nice, and John Clement, dated May 27, 1997. 10.5 Agreement and Plan of Organization among IT Partners, ITP No. 4, Inc., FSC, Charles Schaeffer and Garrett Schaeffer, dated October 20, 1997. 10.6 Agreement and Plan of Organization among IT Partners, ITP No. 11, Inc., Incline, Robert Wentworth, John DeFina, Philip Tomasi and Charles Menzel, dated February 5, 1998. 10.7 Business Combination Agreement among IT Partners, KDP, Martin Kandl and Haeyoung Kandl, dated May 29, 1997. 10.8 Agreement and Plan of Organization among IT Partners, ITP No. 10, Inc., Sequoia, John Bamberger, Alan Wise, William Murray, Michael Baltosiewich, Carl Griffin, William Church and Michael Ryan, dated January 8, 1998. 10.9 Amended and Restated Loan and Security Agreement, dated March 31, 1998, among IT Partners, Sequoia, FSC, Incline, A-COM, CNS, KDP and Creditanstalt, as amended. 10.10 IT Partners, Inc. Amended 1997 Long-Term Incentive Plan. II-5 EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------------- 10.11 Senior Executive Employment Agreement between IT Partners and Christopher R. Corbett, dated June 30, 1997. 10.12 Executive Employment Agreement between IT Partners and Daniel J. Klein, dated March 7, 1997. 10.13 Employment Agreement between IT Partners and John D. Bamberger, dated January 8, 1998. 10.14 Employment Agreement, between IT Partners and Christine E. Norcross, dated September 16, 1997. 10.15 Executive Employment Agreement between IT Partners and Jamie E. Blech, dated March 7, 1997. 10.16 Promissory Note from IT Partners to Christopher R. Corbett dated June 30, 1997, in the original principal amount of $2,226,000. 10.17 Promissory Note from IT Partners to Stanton L. Call dated May 13, 1998, in the original principal amount of $2,876,206. 10.18 Promissory Note from IT Partners to Stanley Nice dated July 28, 1997, in the original principal amount of $102,036.50. 10.19 Promissory Note from IT Partners to John Clement dated July 28, 1997,in the original principal amount of $102.036.50. 10.20 Promissory Note from IT Partners to Stanley A. Nice dated May 27, 1997, in the original principal amount of $472,409.90. 10.21 Promissory Note from IT Partners to John Clement dated May 27, 1997, in the original principal amount of $432,998.90. 10.22 Amended and Restated Promissory Note from IT Partners to Creditanstalt dated October for $14,000,000, dated October 1997. 10.23 Promissory Note from IT Partners to Charles Schaeffer dated October 20, 1997, in the original principal amount of $199,375. 10.24 Promissory Note from IT Partners to Garrett Schaeffer dated October 20, 1997, in the original principal amount of $244,375. 10.25 Promissory Note from IT Partners to Martin and Haeyoung Kandl dated May 22, 1997, in the original principal amount of $568,790. 10.26 Promissory Note from IT Partners to John D. Bamberger dated January 8, 1998, in the original principal amount of $2,014,240. 10.27 Promissory Note from IT Partners to Alan Wise dated January 8, 1998, in the original principal amount of $1,278,078. *21.1 List of Subsidiaries. **23.1 Consent of Swidler Berlin Shereff Friedman, LLP (filed as part of Exhibit 5.1). **23.2 Consent of Arthur Andersen, LLP. **24.1 Power of Attorney (set forth on signature page). *27.1 Financial Data Schedule. - ---------- * To be filed by amendment. ** Previously filed ITEM 16(B). FINANCIAL STATEMENT SCHEDULES.* * To be completed by amendment. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. II-6 (2) For the purpose of determining any liability under the Securities Act, each such post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. (4) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Washington, D.C., on August 31, 1998. IT PARTNERS, INC. By: /s/ Daniel J. Klein ---------------------------------------- Daniel J. Klein Chairman, Chief Executive Officer and Director PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON AUGUST 31, 1998. NAME TITLE ---- ----- /s/ Daniel J. Klein Chairman, Chief Executive Officer and - ------------------------- Director (Principal Executive Officer) Daniel J. Klein * President, Secretary and Director - ------------------------- Jamie E. Blech * Chief Financial Officer, Treasurer - ------------------------- and Senior Vice President (Principal Mark F. Yanson Financial Officer) * Chief Accounting Officer, Corporate - ------------------------- Controller and Vice President Anthony M. Corbi (Principal Accounting Officer) * Director - ------------------------- John D. Bamberger * Director - ------------------------- Christopher R. Corbett Director - ------------------------- Charles Schaeffer * Director - ------------------------- James D. Lumsden * Director - ------------------------- Martin S. Pinson * Daniel J. Klein, by signing his name hereto, signs this document on behalf of each of the persons so indicated above pursuant to powers of attorney duly executed by such person and filed with the Securities and Exchange Commission II-9 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------------- *1.1 Form of Underwriting Agreement. *3.1 Certificate of Incorporation, as amended. *3.2 By-Laws, as amended. *4.1 Specimen Common Stock Certificate. 4.2 Amended and Restated Warrant Agreement dated December 16, 1997, as amended. 4.3 Amended and Restated Stockholder Agreement dated March 31, 1998, as amended. 4.4 Preferred Stock and Warrant Purchase Agreement dated May 30, 1997, as amended. 4.5 Promissory Note from IT Partners to Stanton L. Call dated May 13, 1998 in the original principal amount of $2,876,206, convertible into Common Stock. 4.6 Convertible Promissory Note from IT Partners to Servinet dated June 10, 1998, with any unpaid principal amount outstanding convertible at Servinet's option into Common Stock. 4.10 12.0% Series C Senior Redeemable Preferred Stock Purchase Agreement dated July 28, 1998, between IT Partners and FBR Business Development Capital. 4.11 Certificate of Designation of Preferences and Rights of 12.0% Series C Redeemable Preferred Stock of IT Partners, dated July 28, 1998. 4.12 12.0% Series C Senior Redeemable Preferred Stock Purchase Agreement dated July 31, 1998, between IT Partners and Wachovia Capital Associates, Inc. **5.1 Opinion of Swidler Berlin Shereff Friedman, LLP. 10.1 Asset Purchase Agreement between IT Partners and Servinet, dated June 10, 1998. 10.2 Asset Purchase Agreement between IT Partners and Stanton L. Call, dated May 13, 1998. 10.3 Business Combination Agreement among IT Partners, ITP Acquisition Corp., A-COM, Christopher Corbett and Merrie Corbett, dated June 30, 1997. 10.4 Business Combination Agreement among IT Partners, CNS, Stanley Nice, and John Clement, dated May 27, 1997. 10.5 Agreement and Plan of Organization among IT Partners, ITP No. 4, Inc., FSC, Charles Schaeffer and Garrett Schaeffer, dated October 20, 1997. 10.6 Agreement and Plan of Organization among IT Partners, ITP No. 11, Inc., Incline, Robert Wentworth, John DeFina, Philip Tomasi and Charles Menzel, dated February 5, 1998. 10.7 Business Combination Agreement among IT Partners, KDP, Martin Kandl and Haeyoung Kandl, dated May 29, 1997. 10.8 Agreement and Plan of Organization among IT Partners, ITP No. 10, Inc., Sequoia, John Bamberger, Alan Wise, William Murray, Michael Baltosiewich, Carl Griffin, William Church and Michael Ryan, dated January 8, 1998. 10.9 Amended and Restated Loan and Security Agreement, dated March 31, 1998, among IT Partners, Sequoia, FSC, Incline, A-COM, CNS, KDP and Creditanstalt, as amended. 10.10 IT Partners, Inc. Amended 1997 Long-Term Incentive Plan. II-5 EXHIBIT NUMBER DESCRIPTION - ---------- ------------------------------------------------------------------- 10.11 Senior Executive Employment Agreement between IT Partners and Christopher R. Corbett, dated June 30, 1997. 10.12 Executive Employment Agreement between IT Partners and Daniel J. Klein, dated March 7, 1997. 10.13 Employment Agreement between IT Partners and John D. Bamberger, dated January 8, 1998. 10.14 Employment Agreement, between IT Partners and Christine E. Norcross, dated September 16, 1997. 10.15 Executive Employment Agreement between IT Partners and Jamie E. Blech, dated March 7, 1997. 10.16 Promissory Note from IT Partners to Christopher R. Corbett dated June 30, 1997, in the original principal amount of $2,226,000. 10.17 Promissory Note from IT Partners to Stanton L. Call dated May 13, 1998, in the original principal amount of $2,876,206. 10.18 Promissory Note from IT Partners to Stanley Nice dated July 28, 1997, in the original principal amount of $102,036.50. 10.19 Promissory Note from IT Partners to John Clement dated July 28, 1997, in the original principal amount of $102.036.50. 10.20 Promissory Note from IT Partners to Stanley A. Nice dated May 27, 1997, in the original principal amount of $472,409.90. 10.21 Promissory Note from IT Partners to John Clement dated May 27, 1997, in the original principal amount of $432,998.90. 10.22 Amended and Restated Promissory Note from IT Partners to Creditanstalt dated October for $14,000,000, dated October 1997. 10.23 Promissory Note from IT Partners to Charles Schaeffer dated October 20, 1997, in the original principal amount of $199,375. 10.24 Promissory Note from IT Partners to Garrett Schaeffer dated October 20, 1997, in the original principal amount of $244,375. 10.25 Promissory Note from IT Partners to Martin and Haeyoung Kandl dated May 22, 1997, in the original principal amount of $568,790. 10.26 Promissory Note from IT Partners to John D. Bamberger dated January 8, 1998, in the original principal amount of $2,014,240. 10.27 Promissory Note from IT Partners to Alan Wise dated January 8, 1998, in the original principal amount of $1,278,078. *21.1 List of Subsidiaries. **23.1 Consent of Swidler Berlin Shereff Friedman, LLP (filed as part of Exhibit 5.1). **23.2 Consent of Arthur Andersen, LLP. **24.1 Power of Attorney (set forth on signature page). *27.1 Financial Data Schedule. - ---------- * To be filed by amendment. ** Previously filed EX-4.2 2 AMENDED AND RESTATED WARRANT AGREEMENT THIS AMENDED AND RESTATED WARRANT AGREEMENT dated as of December 16, 1997 (as amended, restated, supplemented or modified from time to time, the "Warrant Agreement") between IT Partners, Inc., a Delaware corporation (the "Issuer"), and Creditanstalt Corporate Finance, Inc. having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 ("Creditanstalt"). W I T N E S S E T H: WHEREAS, pursuant to the Loan and Security Agreement dated as of May 30, 1997, as amended by that certain First Amendment to Loan and Security Agreement dated as of October 17, 1997 (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement") among Issuer, the financial institutions named therein as lenders (the "Lenders"), Creditanstalt-Bankverein, as the issuing bank (the "Issuing Bank"), and Creditanstalt as the agent for the Lenders (in such capacity, the "Agent"), Creditanstalt as sole lender under the Loan Agreement agreed to make certain loans (the "Loans") to the Issuer upon the terms, and subject to the conditions, set forth in the Loan Agreement; and WHEREAS, in order to induce Creditanstalt to structure and to provide the Loans, the Issuer executed and delivered a Warrant Agreement dated as of May 30, 1997, as amended by that certain First Amendment to Warrant Agreement dated as of July 11, 1997, as further amended by that certain Second Amendment to Warrant Agreement dated as of October 27, 1997 (as amended, the "Original Warrant Agreement") and issued to Creditanstalt warrants exercisable for up to 412,579 shares of Common Stock or Convertible Preferred Stock as hereinafter described; and WHEREAS, the Issuer, the Lenders, the Issuing Bank, and the Agent wish to enter into a Second Amendment to Loan and Security Agreement dated as of the date hereof (as the same may be amended, restated, supplemented or otherwise modified from time to time, the "Loan Agreement Amendment") to increase the aggregate maximum amount of Loans available to Issuer thereunder from Fourteen Million Dollars ($14,000,000) to Thirty-Five Million Dollars ($35,000,000); and WHEREAS, in connection with and to induce Creditanstalt as sole lender under the Loan Agreement to enter into the Loan Agreement Amendment, the Issuer has agreed to amend and restate the Original Warrant Agreement, as further set forth herein, in order to provide for the issuance of certain additional Warrants and make certain other changes set forth herein; NOW, THEREFORE, in consideration of the premises, the terms and conditions herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. (a) As used in this Warrant Agreement, unless otherwise defined herein, terms defined in the Loan Agreement (as in effect on the date hereof, whether or not the Loan Agreement is thereafter terminated or expires according to its terms) shall have such defined meanings when used herein and the following terms shall have the following meanings, unless the context otherwise requires: "Affiliate" of any Person shall mean any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For purposes of this definition, a Person shall be deemed to control another Person if such first Person possesses directly or indirectly the power to (i) vote 10% or more of the securities having ordinary voting power for the selection of directors of such Person or (ii) direct, or cause the direction of, the management and policies of the second Person, whether through the ownership of voting securities, by contract or otherwise. In addition, as to Creditanstalt, "Affiliate" shall include any partnership a majority of the partners of which are officers, directors, employees or Affiliates of Creditanstalt, and as to the Issuer, "Affiliate" shall not include Creditanstalt or any Affiliate of Creditanstalt which is a holder of any Warrants. "Business Combination Options" shall mean options to purchase Common Stock of the Issuer which (a) are issued to employees of Subsidiaries acquired by the Issuer after the date hereof or to employees of the Issuer hired after the date hereof; (b) in the aggregate do not exceed 12% of the Common Stock issued by the Issuer as a portion of the purchase price in Acquisitions consummated by the Issuer after the date hereof (other than any Acquisition of LanVantage, Inc.) and (c) have an exercise price equal to the fair market value of the Common Stock on the date such option is granted, as determined in good faith by the Board of Directors of the Issuer and giving effect to any Acquisition consummated on such date. "Closing Date" shall mean December 16, 1997, the date of the closing of the Loan Agreement Amendment. "Commission" shall mean the Securities and Exchange Commission or any entity succeeding to any or all of its functions under the Securities Act and the Exchange Act. "Common Stock" shall mean the Common Stock, par value $.01 per share, of the Issuer, which has voting rights, and shall include any stock into which such Common Stock shall have been changed or any stock resulting from any reclassification of such Common Stock and all other stock of any class or classes (however designated) of the Issuer the registered holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions on any shares entitled to preference. "Composite Transaction Tape" shall mean a security price reporting service that includes all transactions in a security on each of the exchanges and in the over-the-counter market. "Convertible Preferred Stock" shall mean the Series B Preferred Stock, par value $.01 per share, of the Issuer which is convertible into Common Stock of the Issuer, and shall include any stock into which such Series B Preferred Stock shall have been changed or any stock resulting from any reclassification of such Series B Preferred Stock. "Current Market Price Per Share" shall mean, with respect to any share of the Common Stock, as of any particular date of determination: (i) if the Common Stock is then reported on the Composite Transaction Tape, the average of the daily closing prices for the 30 consecutive trading days immediately prior to such date as reported on the Composite Transactions Tape (as adjusted for any stock dividend, split, combination or reclassification that occurred during such 30-day period); or (ii) if the Common Stock is not then reported on the Composite Transaction Tape but is then listed or admitted to trading on a national securities exchange, the average of the daily last sale prices regular way of the Common Stock, for the 30 consecutive trading days immediately prior to such date (as adjusted for any stock dividend, split, combination or reclassification that occurred during such 30-day period), on the principal national securities exchange on which the Common Stock is traded or, in case no such sale takes place on any such day, the average of the closing bid and asked prices regular way, in either case on such national securities exchange; or (iii) if the Common Stock is not then reported on the Composite Transaction Tape but is then traded in the over-the-counter market, the average of the daily closing sales prices, or, if there is no closing sales price, the average of the closing bid and asked prices, in the over-the-counter market, for the 30 consecutive trading days immediately prior to such date (as adjusted for any stock dividend, split, combination or reclassification that occurred during such 30-day period), as reported by the National Association of Securities Dealers' Automated Quotation System, or, if not so reported, as reported by the National Quotation Bureau, Incorporated or any successor thereof, or, if not so reported the average of the closing bid and asked prices as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Board of Directors of the Issuer for that purpose; or (iv) if no such prices are then furnished, the higher of (x) the Exercise Price and (y) the fair market value of a share of Common Stock as determined by agreement between the holders of a majority of the Warrants and the Issuer or, in the absence of such an agreement, by an independent investment banking firm or an independent appraiser engaged by the Issuer (in either case the cost of which engagement will be borne by the Issuer) and reasonably acceptable to the holders of a majority of the Warrants; provided, however, that between the date hereof and 60 days from the date hereof, the Current Market Price Per Share of the Common Stock shall not be less than $5.00 per share. "Equity of the Issuer" shall mean the total stockholders' equity of the Issuer, determined in accordance with generally accepted accounting principles. The amount of Equity of the Issuer represented by any Warrant Shares shall be determined by subtracting from total Equity of the Issuer the aggregate amount distributable as a preference upon dissolution of the Issuer to the holders of any then outstanding shares of any class or series of preferred stock (other than the Convertible Preferred Stock), dividing the balance obtained by the number of shares of Common Stock then outstanding or issuable upon conversion of any Convertible Preferred Stock then outstanding, and multiplying that per share amount by the aggregate number of Warrant Shares. "Equity Warrants" shall mean the warrants issued pursuant to the Series A Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by that certain First Amendment to Preferred Stock and Warrant Purchase Agreement dated as of July 11, 1997, as further amended by that certain Second Amendment to Preferred Stock and Warrant Purchase Agreement dated as of October 27, 1997, as further amended by that certain Third Amendment to Preferred Stock and Warrant Purchase Agreement dated as of October 31, 1997, and as further amended by that certain Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated as of the date hereof (as such may be amended, restated, supplemented or otherwise modified from time to time), among the Issuer, Creditanstalt, FF-ITP, L.P. and certain shareholders of the Issuer named therein. "Equity Warrant Shares" shall mean the shares of Common Stock issued or issuable upon exercise of the Equity Warrants. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute. "Exempted Securities" shall mean (A) Warrant Shares, (B) shares of the Issuer's capital stock issued as a stock dividend described in subsection 12(b), (C) shares of Series A Preferred Stock issued as preferred in kind dividends on the Series A Preferred Stock; (D) options and warrants as listed on Schedule I attached hereto and shares of capital stock issuable upon exercise thereof; (E) the Business Combination Options and shares of capital stock issuable upon exercise thereof; (F) options to be granted to employees of the Issuer and its Subsidiaries to purchase up to 351,029 shares of Common Stock of the Issuer at an exercise price of not less than fair market value on the date such option is granted, as determined in good faith by the Board of Directors of the Issuer and giving effect to any Acquisitions consummated on or before such date, and shares of capital stock issuable upon exercise thereof, (G) 34,364 shares of Common Stock issuable to Terry Hardcastle on or before February 2, 1998 for an aggregate purchase price of $66,666; (H) 103,093 shares of Common Stock issued to Chris Corbett at an aggregate purchase price of $200,000; (I) 29,516 shares of Common Stock issued to FF-ITP on October 31, 1997; (J) additional Equity Warrants for the purchase of 188,680 shares of Common Stock or Convertible Preferred Stock; and (K) 222,222 shares of Convertible Preferred Stock issuable to Creditanstalt at an aggregate purchase price of $1,000,000. The limits in clauses (C), (D), (E), (F), (J), and (K) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. "Exercise Price" shall mean the exercise price of a Warrant, which shall be $.01 per Warrant. "Expiration Date" shall mean, with respect to any Warrant issued hereunder, 5:00 p.m., New York time, on the tenth anniversary of the date on which such Warrant became exercisable. "Indebtedness" shall mean, collectively but without duplication, (a) all indebtedness, obligations or other liabilities for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, which would, in accordance with GAAP, be classified as long-term debt, together with the current maturities thereof, (b) all indebtedness outstanding under any revolving credit, line of credit or similar agreement providing for borrowings (and any extensions or renewals thereof), notwithstanding that any such indebtedness is created within one year of the expiration of such agreement; and (c) the principal component of Capital Lease Obligations, in each case calculated on a consolidated basis for Issuer and its Subsidiaries in accordance with GAAP. "Mandatory Exchange" shall have the meaning given to such term in subsection 16(c). "Mandatory Redemption" shall have the meaning given to such term in subsection 16(a)(i). "Non-Attributable Stock" shall mean shares of Common Stock or Convertible Preferred Stock which have been previously sold, or were issued pursuant to the exercise of Warrants which were previously sold, either (a) in a widely dispersed public offering; (b) in a private placement in which no purchaser, individually or in concert with others, acquired Warrants, Common Stock, Convertible Preferred Stock or any combination thereof, representing (upon conversion, in the case of the Convertible Preferred Stock, and upon exercise for Common Stock, in the case of the Warrants) more than 2% of the outstanding Common Stock; (c) in compliance with Rule 144 (or any rule which is a successor thereto) of the Securities Act or (d) into the secondary market in a market transaction executed through a registered broker-dealer in blocks of no more than 2.0% of the shares outstanding of the Issuer in any six month period. "Non-Public Warrant Shares" shall mean Warrant Shares that have not been sold to the public and bear the legend set forth in subsection 14(b). "Non-Surviving Combination" shall mean any merger, consolidation or other business combination by the Issuer with one or more Persons in which the Issuer is not the survivor, or a sale of all or substantially all of the assets of the Issuer to one or more such other Persons. "Operating Cash Flow" shall mean, for any period for which the same is computed, the sum of (i) the Issuer's and its Subsidiaries' consolidated net income (loss) for such period, plus (ii) the Issuer's and its Subsidiaries' interest expense for such period, plus (iii) the Issuer's and its Subsidiaries' depreciation and amortization for financial reporting purposes for such period, plus (iv) the Issuer's and its Subsidiaries' income tax expense for such period, computed in each case on a consolidated basis in accordance with generally accepted accounting principles. "Put Closing Date" shall have the meaning given to such term in subsection 16 (a)(iii). "Put Period" shall mean the period commencing on November 30, 2001 and ending at 5:00 p.m., New York time, on the Expiration Date; provided that in the event that, on or before November 30, 2001, all indebtedness outstanding under the Loans has been repaid in full and all loan commitments under the Loan Agreement have been terminated, said period shall commence on the date of said repayment of indebtedness and termination of loan commitments. "Put Price" shall have the meaning given to such term in subsection 16(a)(i). "Put Right" shall have the meaning given to such term in subsection 16(a)(i). "Securities Act" shall mean the Securities Act of 1933, as amended, or any successor federal statute and the rules and regulations of the Commission thereunder, all as the same may be in effect from time to time. "Series A Preferred Stock" shall mean the Issuer's Series A Preferred Stock, $.01 par value per share, and shall include any stock into which such Series A Preferred Stock shall have been changed or any stock resulting from any reclassification of such Series A Preferred Stock. "Series A Warrants" shall mean the stock purchase warrants issued on May 30, 1997 pursuant to this Warrant Agreement entitling the record holder thereof to purchase from the Issuer at the Warrant Office an aggregate of 412,579 shares of Common Stock or Convertible Preferred Stock (in the percentages and to the extent provided in subsections 6(e) and 6(f) hereof and subject in each case to adjustment as provided in Section 12) at the Exercise Price at any time before 5:00 p.m., New York time, on the Expiration Date. "Series B Warrants" shall mean the stock purchase warrants issued pursuant to this Warrant Agreement entitling the record holder thereof to purchase from the Issuer at the Warrant Office an aggregate of 45,000 shares of Common Stock or Convertible Preferred Stock (in the percentages and to the extent provided in subsections 6(e) and 6(f) hereof and subject in each case to adjustment as provided in Section 12) at the Exercise Price at any time before 5:00 p.m., New York time, on the Expiration Date. "Series C Issuance Date" shall mean the date on which the Series C Warrants when aggregated with all other capital stock of the Issuer (other than shares of Non-Attributable Stock) currently held or previously held by or currently issuable to Creditanstalt or its Affiliates, would not, upon and giving effect to such issuance, represent in excess of 24.99% of the Equity of the Issuer. "Series C Warrants" shall mean the stock purchase warrants issued or to be issued pursuant to this Warrant Agreement entitling the record holder thereof to purchase from the Issuer at the Warrant Office an aggregate of 155,000 shares of Common Stock or Convertible Preferred Stock (in the percentages and to the extent provided in subsections 6(e) and 6(f) hereof and subject in each case to adjustment as provided in Section 12) at the Exercise Price at any time before 5:00 p.m., New York time, on the Expiration Date. "Subsidiary" shall mean, as to any Person, a corporation of which shares of stock having ordinary voting power (other than stock having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Warrant Agreement shall refer to a Subsidiary or Subsidiaries of the Issuer. "Trigger Date" shall have the meaning given to such term in subsection 16(a)(i). "Valuation Amount" shall mean, as of any date, the greater of (x) zero or (y) an amount equal to Operating Cash Flow for the most recently ended twelve months preceding the date of determination multiplied by six (6), less the principal amount of Indebtedness of Issuer on such date of determination, plus the aggregate amount of cash and/or cash equivalents held by the Issuer on such date of determination; provided, however, that if the holders exercise their Put Right in connection with the termination of the Loan Agreement and the repayment in full of the Loans thereunder, then, for purposes of this definition, the amount of Indebtedness used to calculate the Valuation Amount shall be the principal amount of Indebtedness outstanding immediately prior to such repayment and termination. "Warrant Certificate" shall mean certificate evidencing one or more Warrants, substantially in the form of Exhibit B-1 attached hereto with respect to the Series B Warrants and Exhibit C-1 attached hereto with respect to the Series C Warrants, with such changes therein as may be required to reflect any adjustments made pursuant to Section 12. "Warrant Holders" shall mean Creditanstalt or an Affiliate thereof and such other Persons to whom Creditanstalt or an Affiliate thereof transfers Warrants in compliance with the terms of this Warrant Agreement, and for purposes of Section 15 shall include holders of Non-Public Warrant Shares. "Warrant Office" shall mean the office or agency of the Issuer at which the Warrant Register shall be maintained and where the Warrants may be presented for exercise, exchange, substitution and transfer, which office or agency will be the office of the Issuer at 1006 Highland Drive, Silver Spring, Maryland 20910, which office or agency may be changed by the Issuer pursuant to notice in writing to the Persons named in the Warrant Register as the holders of the Warrants. "Warrant Register" shall mean the register, substantially in the form of Exhibit D attached hereto, maintained by the Issuer at the Warrant Office. "Warrant Shares" shall mean the shares of Common Stock or Convertible Preferred Stock issued or issuable upon exercise of the Warrants, or Common Stock issued or issuable upon conversion of the Convertible Preferred Stock, in each case as the number of such shares may be adjusted from time to time pursuant to Section 12 and the provisions of the Issuer's Certificate of Incorporation. "Warrants" shall mean the stock purchase warrants issued or issuable pursuant to this Warrant Agreement entitling the record holder thereof to purchase from the Issuer at the Warrant Office an aggregate of 612,579 shares of Common Stock or Convertible Preferred Stock (in the percentages and to the extent provided in subsections 6(e) and 6(f) hereof and subject in each case to adjustment as provided in Section 12) at the Exercise Price at any time after the issuance of such Warrant and before 5:00 p.m., New York time, on the Expiration Date; individually, a "Warrant." (b) For all purposes of this Warrant Agreement, except as otherwise expressly provided or unless the context otherwise requires: (i) "Herein," "hereof" and "hereunder" and other words of similar import refer to this Warrant Agreement as a whole and not to any particular Section or other subdivision; (ii) Any uses of the masculine, feminine or neuter gender shall also be deemed to include any other gender as appropriate; (iii) The exhibits and schedules to this Warrant Agreement shall be deemed an integral part of this Warrant Agreement; (iv) Except as specifically set forth in such representation, each of the representations and warranties of the Issuer in Section 3 hereof is separate and is not limited, qualified or modified by the existence, wording or satisfaction of any other representation of the Issuer in Section 3 or otherwise; (v) All references herein (in covenants or otherwise) to any action(s) which are to be taken (or which are prohibited from being taken) by any Person, the Issuer or any Subsidiary shall apply to such Person, the Issuer or such Subsidiary, as the case may be, whether such action is taken directly or indirectly; and (vi) All references herein to actions by the Issuer or any Subsidiary (including, without limitation, actions denoted by terms such as "create," "sell," "transfer" or "dispose of") mean such action whether voluntary or involuntary, by operation of law or otherwise. Section 2. Issuance of Warrants. The Issuer hereby agrees to issue and deliver to Creditanstalt or, at the option of Creditanstalt, an Affiliate thereof, the Warrants and one or more Warrant Certificates evidencing the Warrants as set forth in this Section 2. No payment shall be required from Creditanstalt or its Affiliate in consideration of its receipt of the Warrants. (a) On the Closing Date, Issuer shall issue to Creditanstalt the Series B Warrants entitling Creditanstalt to purchase from the Issuer an aggregate of 45,000 shares of Common Stock or Convertible Preferred Stock, which Series B Warrants shall be immediately exercisable. (b) On the Series C Exercise Date, Issuer shall issue to Creditanstalt the Series C Warrants entitling Creditanstalt to purchase from the Issuer an aggregate of 155,000 shares of Common Stock or Convertible Preferred Stock, which Series C Warrants shall be exercisable only upon such issuance. Section 3. Representations and Warranties. The Issuer hereby represents and warrants to Creditanstalt, for the benefit of Creditanstalt and any other Warrant Holder, as follows: (a) The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to conduct its business as presently conducted and as intended to be conducted, has the corporate power and authority to execute and deliver this Warrant Agreement and the Warrant Certificates, to issue the Warrants and to perform its obligations under this Warrant Agreement and the Warrant Certificates, has the corporate power and authority and legal right to own and lease its properties and is duly qualified and in good standing as a foreign corporation in each jurisdiction in which it owns or leases real property or in which the conduct of its business requires such qualification, except where failure to be so qualified could not be reasonably expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Issuer and its Subsidiaries taken as a whole. (b) The execution, delivery and performance by the Issuer of this Warrant Agreement and the Warrant Certificates, the issuance of the Warrants and the issuance of the Warrant Shares upon the exercise of the Warrants and the issuance of Common Stock upon conversion of the Convertible Preferred Stock have been duly authorized by all necessary corporate action and do not and will not violate, or result in a breach of, or constitute a default under, or require any consent under, or result in the creation of any lien, charge or encumbrance upon the assets of the Issuer pursuant to, any law, statute, ordinance, rule, regulation, order or decree of any court, governmental body or regulatory authority or administrative agency having jurisdiction over the Issuer or its Subsidiaries or the Issuer's Certificate of Incorporation or any contract, mortgage, loan agreement, note, lease or other instrument binding upon the Issuer or its Subsidiaries or by which their properties are bound. (c) This Warrant Agreement has been duly executed and delivered by the Issuer and constitutes a legal, valid, binding and enforceable obligation of the Issuer. When the Warrants and Warrant Certificates have been issued as contemplated hereby, (i) the Warrants and the Warrant Certificates will constitute legal, valid, binding and enforceable obligations of the Issuer and (ii) the Warrant Shares, when issued upon exercise of the Warrants in accordance with the terms hereof, and the Common Stock, when issued upon conversion of the Convertible Preferred Stock in accordance with the terms of the Issuer's Certificate of Incorporation relating to the Convertible Preferred Stock, will be duly authorized, validly issued, fully paid and nonassessable shares of the Common Stock and Convertible Preferred Stock, as applicable, with no personal liability attaching to the ownership thereof. (d) The Issuer has authorized capital stock consisting of 10,000,000 shares of Common Stock, par value $.01 per share, of which 3,640,174 shares are issued and outstanding and 2,000,000 shares of Preferred Stock, par value $.01 per share, of which 450,000 shares are designated as Series A Preferred Stock, of which 231,800 shares are issued and outstanding, and 1,400,000 shares are designated as Series B Preferred Stock, none of which are issued and outstanding. Except as set forth on Schedule I hereto, there are no outstanding options, warrants, subscriptions, rights, convertible or exchangeable securities or other agreements or plans under which the Issuer may be or become obligated to issue, sell or transfer shares of its capital stock of other securities. The Convertible Preferred Stock has no voting rights, except as required by law, and is convertible on a share-for-share basis into Common Stock of the Issuer. To the Issuer's best knowledge, other than the Stockholder Agreement dated May 30, 1997 (as amended, restated, supplemented or otherwise modified from time to time) by and among the Issuer, Daniel J. Klein, Jamie Blech, Martin F. Kandl and Haeyoung Kandl, Stanley Nice, John Clement, Creditanstalt, FF-ITP, L.P. and subsequent stockholders, there are no voting agreements, voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Issuer or any Subsidiary. (e) Except as set forth on Schedule II hereto, no holder of securities of the Issuer has any right to the registration of such securities under the Securities Act and any applicable state securities law. (f) Each of the Subsidiaries of the Issuer is listed on Schedule III to this Warrant Agreement. All outstanding shares of capital stock of such Subsidiaries have been duly authorized and validly issued and are fully paid and nonassessable and are owned beneficially and of record by the Issuer free and clear of all Liens, options or claims of any kind. There are no outstanding options, warrants, subscriptions, rights, convertible securities or other agreements or plans under which Subsidiary of the Issuer may become obligated to issue, sell or transfer shares of its capital stock or other securities. Section 4. Registration, Transfer and Exchange of Certificates. (a) The Issuer shall maintain, at the Warrant Office, the Warrant Register for registration of the Warrants and Warrant Certificates and transfers thereof. On the Closing Date, the Issuer shall register the Warrants and Warrant Certificates in the Warrant Register in the name of Creditanstalt or an Affiliate thereof, as the case may be. The Issuer may deem and treat the registered holders of the Warrant Certificates as the absolute owners thereof and the Warrants represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificates made by any person) for the purpose of any exercise thereof or any distribution to the holders thereof, and for all other purposes, and the Issuer shall not be affected by any notice to the contrary. (b) Subject to Section 14, the Issuer shall register the transfer of any outstanding Warrants in the Warrant Register upon surrender of the Warrant Certificates evidencing such Warrants to the Issuer at the Warrant Office, accompanied (if so required by it) by a written instrument or instruments of transfer in form satisfactory to it, duly executed by the registered holder or holders thereof or by the duly appointed legal representative thereof. Upon any such registration of transfer, new Warrant Certificates evidencing such transferred Warrants shall be issued to the transferee and the surrendered Warrant Certificates shall be canceled. If less than all the Warrants evidenced by Warrant Certificates surrendered for transfer are to be transferred, new Warrant Certificates shall be issued to the holder surrendering such Warrant Certificates evidencing such remaining number of Warrants. (c) Warrant Certificates may be exchanged at the option of the holders thereof, when surrendered to the Issuer at the Warrant Office, for another Warrant Certificate or other Warrant Certificates of like tenor and representing in the aggregate a like number of Warrants. Warrant Certificates surrendered for exchange shall be canceled. (d) No charge shall be made for any such transfer or exchange except for any tax or other governmental charge imposed in connection therewith. Except as provided in subsection 14(b) each Warrant Certificate issued upon transfer or exchange shall bear the legend set forth in subsection 14(b) if the Warrant Certificate presented for transfer or exchange bore such legend. Section 5. Mutilated or Missing Warrant Certificates. If any Warrant Certificate shall be mutilated, lost, stolen or destroyed, the Issuer shall issue, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Issuer of such loss, theft or destruction of such Warrant Certificate and, if requested, indemnity satisfactory to it. The Issuer acknowledges that a written indemnity by Creditanstalt or, if an Affiliate of Creditanstalt is the holder of such lost, stolen or destroyed Warrant Certificate, by such Affiliate, shall be satisfactory to the Issuer for such purpose. No service charge shall be made for any such substitution, but all expenses and reasonable charges associated with procuring such indemnity and all stamp, tax and other governmental duties that may be imposed in relation thereto shall be borne by the holder of such Warrant Certificate. Each Warrant Certificate issued in any such substitution shall bear the legend set forth in subsection 14(b) if the Warrant Certificate for which such substitution was made bore such legend. Section 6. Duration and Exercise of Warrants. (a) A Warrant evidenced by a Warrant Certificate shall be exercisable in whole or in part by the registered holder thereof on any Business Day after the issuance of such Warrant, and on or before 5:00 P.M., New York time, on the Expiration Date. (b) Subject to the provisions of this Warrant Agreement, the Warrants evidenced by a Warrant Certificate may be exercised by the registered holder thereof by the surrender of the Warrant Certificate evidencing the Warrants to be exercised, with the form of election to purchase on the reverse thereof or attached thereto duly completed and signed, to the Issuer at the Warrant Office, and upon payment of the aggregate Exercise Price for the number of Warrant Shares in respect of which such Warrants are being exercised in lawful money of the United States of America and/or by surrender to the Issuer of shares of Common Stock then owned by the Warrant Holder and valued for purposes hereof at their Current Market Price Per Share at the time of exercise. In lieu of exercising Warrants pursuant to the immediately preceding sentence, the Warrant Holder shall have the right to require the Issuer to convert the Warrants, in whole or in part and at any time or times (the "Conversion Right"), into Warrant Shares, by surrendering to the Issuer the Warrant Certificate evidencing the Warrants to be converted, accompanied by the form of conversion notice on the reverse thereof or attached thereto which has been duly completed and signed. Upon exercise of the Conversion Right, the Issuer shall deliver to the Warrant Holder (without payment by the Warrant Holder of any Exercise Price) that number of Warrant Shares which is equal to the quotient obtained by dividing (x) the value of the number of Warrants being converted at the time the Conversion Right is exercised (determined by subtracting the aggregate Exercise Price for all such Warrants immediately prior to the exercise of the Conversion Right from the aggregate current market price (determined on the basis of the Current Market Price Per Share) of that number of Warrant Shares purchasable upon exercise of such Warrants immediately prior to the exercise of the Conversion Right (taking into account all applicable adjustments pursuant to Section 12, including without limitation any adjustments which would be made pursuant to subdivision (7) of subsection 12(c) upon exercise of the Warrants being converted) by (y) the Current Market Price Per Share of one share of Common Stock (or the number of shares of Common Stock into which one share of Convertible Preferred Stock can be converted if the Warrants are being converted into Convertible Preferred Stock) immediately prior to the exercise of the Conversion Right. Any references in this Warrant Agreement to the "exercise" of any Warrants, and the use of the term "exercise" herein, shall be deemed to include (without limitation) any exercise of the Conversion Right. Any exercise of a Warrant hereunder may be made subject to the satisfaction of one or more conditions (including, without limitation, the consummation of a sale of the capital stock of the Issuer or a merger or other business combination involving the Issuer) which are set forth in a writing which is made a part of or is appended to the aforementioned form of election to purchase or conversion notice (as the case may be) by the Warrant Holder. (c) Upon exercise of any Warrants hereunder, the Issuer shall issue and cause to be delivered to or upon the written order of the registered holders of such Warrants and in such name or names as such registered holders may designate, a certificate for the Warrant Share or Warrant Shares issued upon such exercise of such Warrants. Any Persons so designated to be named therein shall be deemed to have become holders of record of such Warrant Share or Warrant Shares as of the date of exercise of such Warrants. (d) If less than all of the Warrants evidenced by a Warrant Certificate are exercised at any time, a new Warrant Certificate or Certificates shall be issued for the remaining number of Warrants evidenced by such Warrant Certificate. Each new Warrant Certificate so issued shall bear the legend set forth in subsection 14(b) if the Warrant Certificate presented in connection with partial exercise thereof bore such legend unless the transfer restrictions referred to in such legend are no longer applicable pursuant to subsection 14(d). All Warrant Certificates surrendered upon exercise of Warrants shall be canceled. (e) At the election of a Warrant Holder made at the time of exercise, the Warrant Shares to be issued upon such exercise may be either Common Stock or Convertible Preferred Stock (or a combination thereof), provided that the Warrant Holder shall not have the right to have issued to it upon exercise Common Stock which, when aggregated with all other shares of Common Stock (other than shares of Non-Attributable Stock) currently or previously held by or currently issuable without restriction to the Warrant Holder, will exceed 4.99% of the then outstanding Common Stock unless such Warrant Holder certifies that such Warrants have previously been transferred either (i) in a widely dispersed public offering of the Warrants, or (ii) in a private placement in which no purchaser, individually or in concert with others, would have acquired more than 2% of the outstanding Common Stock if the Warrants so transferred had been exercised for Common Stock, or (iii) in compliance with Rule 144 (or any rule which is a successor thereto) of the Securities Act, or (iv) into the secondary market in a market transaction executed through a registered broker-dealer in blocks of no more than 2.0% of the shares outstanding of the Issuer in any six month period; provided further that if the Warrant Holder is a bank or an Affiliate of a bank subject to the provisions of the Bank Holding Company Act of 1956, as amended, such Common Stock, together with all other shares of Common Stock currently or previously held by or currently issuable without restriction to such Warrant Holder and its Affiliates (not including Non-Attributable Stock), will not exceed 4.99% of the then outstanding Common Stock. In the event two or more Warrant Holders attempt to exercise Warrants for Common Stock simultaneously and, if permitted, such exercises would cause the 4.99% limitation to be exceeded, then the Issuer shall notify the Warrant Holders who had attempted to exercise Warrants for Common Stock and each such Warrant Holder shall be entitled to exercise for Common Stock only such number of Warrants as shall equal the product of (i) the number of Warrants the Warrant Holder sought to exercise for Common Stock times (ii) a fraction, the numerator of which is the maximum number of Warrants which may be exercised for Common Stock without exceeding the 4.99% limitation and the denominator of which is the maximum number of Warrants sought to be exercised for Common Stock by such Warrant Holders. (f) Notwithstanding the foregoing provisions of this Section 6, in no event shall any Warrant be exercisable for shares of Common Stock or Convertible Preferred Stock which, when aggregated with all other capital stock of the Issuer (other than shares of Non-Attributable Stock) currently held or previously held by or currently issuable without restriction to Creditanstalt or its Affiliates, would, upon issuance, represent in excess of 24.99% of the Equity of the Issuer unless such shares, when issued, would constitute Non-Attributable Stock. Section 7. No Fractional Shares. The Issuer shall not be required to issue fractional shares of Common Stock or Convertible Preferred Stock upon exercise of the Warrants but shall pay for any such fraction of a share an amount in cash equal to the then Current Market Price Per Share of one share of Common Stock multiplied by such fraction. Section 8. Payment of Taxes. The Issuer will pay all taxes attributable to the initial issuance of Warrant Shares upon the exercise of the Warrants, provided that the Issuer shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue of any Warrant Certificate or any certificate for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Issuer shall not be required to issue or deliver such certificate unless or until the person or persons requesting the issuance thereof shall have paid to the Issuer the amount of such tax or shall have established to the satisfaction of the Issuer that such tax has been paid. Section 9. Stockholder Rights. (a) Nothing contained in this Warrant Agreement or in any of the Warrant Certificates shall be construed as conferring upon the holders thereof the right to vote or to consent or to receive notice as a stockholder in respect of the meetings of stockholders or the election of directors of the Issuer or any other matter, or any rights whatsoever as a stockholder of the Issuer. (b) Nothing contained in this Warrant Agreement or in any of the Warrant Certificates shall be construed as imposing any obligation on the registered holders thereof to purchase any securities or as imposing any liabilities on such holders as stockholders of the Issuer, whether such obligation or liabilities are asserted by the Issuer or by creditors of the Issuer. Section 10. Reservation and Issuance of Warrant Shares; Certain Corporate Actions. (a) The Issuer will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise of the Warrants and conversion of the Convertible Preferred Stock, the number of shares of Common Stock and Convertible Preferred Stock deliverable upon exercise of all outstanding Warrants and conversion of Convertible Preferred Stock. (b) The Issuer covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant Agreement and the Issuer's Certificate of Incorporation, be fully paid and nonassessable and free from all taxes (except as otherwise contemplated in Section 8 hereof) with respect to the issuance thereof and from all liens, charges and security interests (other than any created by or on behalf of any Warrant Holder). (c) So long as any Warrants are outstanding, the Issuer shall make no amendment of its Certificate of Incorporation which would affect the authorization, dividend, put, voting, liquidation, conversion, exchange or notice rights or additional remedies provisions of the Convertible Preferred Stock without the written consent of all of the Warrant Holders. (d) The Issuer will not, by amendment of its Certificate of Incorporation or through any consolidation, merger, reorganization, transfer of assets, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant Agreement or the Warrant Certificates. Without limiting the generality of the foregoing, the Issuer (i) will not permit the par value or the determined or stated value of any shares of the Issuer's Common Stock or Convertible Preferred Stock receivable upon the exercise of the Warrants to exceed the amount payable therefor upon such exercise, (ii) will take all such action as may be necessary or appropriate in order that the Issuer may validly and legally issue fully paid and nonassessable shares of the Issuer's Common Stock or Convertible Preferred Stock (as the case may be), upon the exercise of the Warrants from time to time outstanding, including, without limitation, amending its Certificate of Incorporation to reduce or eliminate the par value of the Common Stock, (iii) will not take any action which results in an adjustment in the number of Warrant Shares obtainable upon the exercise of any Warrants if the total number of shares of the Issuer's Common Stock (or other securities) issuable after such action upon the exercise of all of the then-outstanding Warrants would exceed the total number of shares of the Issuer's Common Stock (or other securities) then authorized by the Issuer's Certificate of Incorporation and available for purpose of issuance upon such exercise, (iv) will not have any authorized Common Stock other than its existing authorized Common Stock, and (v) will not amend its Certificate of Incorporation to change any terms of its Common Stock. (e) If the Issuer proposes, prior to the Expiration Date, to enter into a transaction that would constitute a Non-Surviving Combination, if consummated, the Issuer shall give written notice thereof to each of the Warrant Holders promptly after an agreement is reached with respect to the Non-Surviving Combination but in any event no less than thirty (30) days prior to the consummation thereof. Such notice shall describe the proposed transaction in reasonable detail and specify the consideration to be received by the Warrant Holders in respect thereto and/or any adjustment to be made to the number of Warrant Shares obtainable upon the exercise of the Warrants as a result of such Non-Surviving Combination. The Issuer shall also furnish to each Warrant Holder all notices and materials furnished to its stockholders in connection with such transaction as and when such notices and materials are furnished to its stockholders. The Issuer agrees that it will not enter into an agreement providing for a Non-Surviving Combination or effect any such Non-Surviving Combination unless the party to such transaction that is the surviving entity thereof or the purchaser or purchasers of substantially all of the assets of the Issuer (the "Survivor") (i) shall be obligated to distribute or pay to each Warrant Holder, upon payment of the Exercise Price prior to the Expiration Date, the number of shares of stock or other securities or other property (including any cash) of the Survivor that would have been distributable or payable on account of the Warrant Shares if such Warrant Holder's Warrants had been exercised immediately prior to such Non-Surviving Combination (or, if applicable, the record date therefor), as such number of shares or other securities or other property may thereafter be adjusted pursuant to Section 12 of this Warrant Agreement and (ii) shall assume by written instrument all of the obligations of the Issuer under this Warrant Agreement. Section 11. Obtaining of Governmental Approvals and Stock Exchange Listings. Subject, in the case of any registration under the Securities Act, to the limitations set forth in Section 15, the Issuer will, at its own expense, from time to time take all action which may be necessary to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities which are or become requisite in connection with the issuance, sale, transfer and delivery of the Warrant Certificates and the exercise of the Warrants and the issuance, sale, transfer and delivery of the Warrant Shares and all action which may be necessary so that such Warrant Shares, immediately upon their issuance upon the exercise of Warrants and conversion of the Convertible Preferred Stock, will be listed on each securities exchange, if any, on which the Common Stock and/or Convertible Preferred Stock is then listed. Section 12. Adjustment of Number of Warrant Shares Purchasable. (a) The number of shares of Common Stock or Convertible Preferred Stock purchasable upon the exercise of each Warrant is subject to adjustment from time to time upon the occurrence of any of the events enumerated in this Section 12 at any time or from time to time after the date hereof and prior to the Expiration Date. (b) If the Issuer shall (i) declare a dividend on the Common Stock or Convertible Preferred Stock in shares of its capital stock (whether shares of Common Stock, Convertible Preferred Stock or of capital stock of any other class), (ii) split or subdivide the outstanding Common Stock or Convertible Preferred Stock or (iii) combine the outstanding Common Stock or Convertible Preferred Stock into a smaller number of shares, each Warrant outstanding at the time of the record date for such dividend or of the effective date of such split, subdivision or combination shall thereafter entitle the holder of such Warrant to receive the aggregate number and kind of shares which, if such Warrant had been exercised immediately prior to such time, such holder would have owned or have become entitled to receive by virtue of such dividend, subdivision or combination. Such adjustment shall be made successively whenever any event listed above shall occur and, if a dividend which is declared is not paid, each Warrant outstanding shall again entitle the holder thereof to receive the number of shares of Common Stock or Convertible Preferred Stock as would have been the case had such dividend not been declared. If at any time, as a result of an adjustment made pursuant to this subsection 12(b), the holder of any Warrant thereafter exercised shall become entitled to receive any shares of capital stock of the Issuer other than shares of Common Stock and Convertible Preferred Stock, thereafter the number of such other shares so receivable upon exercise of any Warrant shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the Warrant Shares contained in this Section 12, and the provisions of this Warrant Agreement with respect to the Warrant Shares shall apply on like terms to such other shares. (c) If the Issuer shall issue any shares of Common Stock without consideration or at a price per share less than the Current Market Price Per Share of the Common Stock as at the date of such issuance, including any shares of Common Stock deemed to have been issued pursuant to this subsection 12(c) but excluding any Exempted Securities, each Warrant outstanding on the date of such issuance shall thereafter entitle the holder of such Warrant to receive a number of shares of Common Stock or Convertible Preferred Stock equal to the product of (i) the number of shares of Common Stock or Convertible Preferred Stock to which the holder of such Warrant was entitled immediately prior to such issuance and (ii) the quotient that is obtained by dividing: (X) the total number of shares of Common Stock outstanding immediately after such issuance (including any shares of Common Stock deemed to have been issued pursuant to this subsection 12(c)) by (Y) the sum of (i) the number of shares of Common Stock outstanding immediately prior to such issuance plus (ii) the number of shares of Common Stock which the aggregate consideration received (or deemed to be received) by the Issuer upon such issuance would purchase at such Current Market Price Per Share. For purposes of any adjustment of the number of shares of Common Stock or Convertible Preferred Stock obtainable upon the exercise of any Warrants pursuant to this subsection 12(c), the following provisions shall be applicable: (1) In the case of the issuance of Common Stock for cash, the consideration therefor shall be deemed to be the amount of cash paid therefor, without deducting therefrom any discounts, commissions or other expenses allowed, paid or incurred by the Issuer in connection with the issuance or sale thereof. (2) In the case of the issuance of Common Stock for a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined by agreement between the holders of a majority of the Warrants outstanding and the Issuer or, in the absence of such an agreement, by an independent investment banking firm or an independent appraiser engaged by the Issuer and reasonably acceptable to the holders of a majority of the Warrants outstanding (in either case the cost of which engagement will be borne by the Issuer). In the case of any issuance of Common Stock upon the exercise of any warrants, options or other rights or the conversion or exchange of any convertible or exchangeable securities, the aggregate consideration received by the Issuer upon such issuance shall be deemed to include the consideration, if any, received by the Issuer as consideration for the issuance of such warrants, options or rights or such convertible or exchangeable securities (excluding any cash received on account of accrued interest or accrued dividends) and, in the case of any conversion or exchange of securities, shall not include any amount attributable to the converted or exchanged securities. If any warrant, option or right to purchase or subscribe for any Common Stock or convertible securities is issued in connection with the issuance or sale of other securities by the Issuer, together comprising one integrated transaction in which no specific consideration is allocated to such warrant, option, right or security, such warrant, option, right, or security shall be deemed to have been issued for no consideration. (3) If (a) the Issuer shall issue warrants or options to purchase or rights to subscribe for Common Stock other than Exempted Securities, and (b) the consideration, if any, received by the Issuer as consideration for the issuance of such warrants, options or rights plus the minimum aggregate consideration required to be paid upon exercise of such warrants, options or rights (the amount of such consideration to be determined in each case as set forth above) shall be less than the product of the Current Market Price Per Share on the date of such issuance multiplied by the maximum number of shares of Common Stock deliverable upon such exercise, then such aggregate maximum number of shares shall be deemed to have been issued at the time such warrants, options or rights were issued and for a consideration equal to such minimum aggregate consideration. (4) If (a) the Issuer shall issue (i) securities (other than Exempted Securities) which are by their terms convertible into or exchangeable for Common Stock or (ii) warrants or options to purchase or rights to subscribe for any such convertible or exchangeable securities, and (b) the consideration received by the Issuer for any such securities or any such warrants, options or rights (excluding any cash received on account of accrued interest or accrued dividends) plus the minimum aggregate consideration (not including any amount attributed to the converted or exchanged securities), if any, to be received by the Issuer upon the conversion or exchange of such securities or upon the exercise of such warrants, options or rights and the conversion or exchange of the securities received upon such exercise, as the case may be (the amount of such consideration to be determined in each case as set forth above) shall be less than the product of the Current Market Price Per Share on the date of such issuance multiplied by the maximum number of shares deliverable upon conversion of or in exchange for such convertible or exchangeable securities or upon the exercise of any such warrants, options or rights and subsequent conversion or exchanges thereof, then such securities, warrants, options or rights shall be deemed to have been exercised and/or converted or exchanged, and the aggregate maximum number of shares of Common Stock shall be deemed to have been issued at the time such securities, warrants, options or rights were issued for a consideration equal to such minimum aggregate consideration. (5) Upon any reduction in the exercise price of Common Stock deliverable upon exercise of any of such warrants, options or rights as are referred to in this subsection 12(c) or any reduction in the amount of consideration required to be paid or the conversion or exchange price or ratio payable upon conversion or exchange of any of such convertible or exchangeable securities, in each case other than a change resulting from any antidilution provisions thereof which are no more favorable in such instance to the holder thereof than the provisions of this Section 12 are to the Warrant Holders, (i) if an adjustment shall previously have been made pursuant to this subsection 12(c) in respect of such warrants, options or rights or such securities, the number of shares of Common Stock or Convertible Preferred Stock obtainable upon the exercise of the Warrants shall forthwith be readjusted to such number of shares as would have obtained had the adjustment made upon the issuance of such warrants, options, rights or securities as have not been exercised, converted or exchanged prior to such change (or any prior adjustment made pursuant to this subdivision (5)) been made upon the basis of such change, and (ii) if an adjustment has not previously been made pursuant to this subsection 12(c) in respect of such options or rights or such securities, then such warrants, options or rights or such securities shall be deemed to have been granted or issued (as the case may be) for purposes of this subsection 12(c) as of the date of such reduction, and any adjustments required to be made pursuant to this subsection 12(c) as a result of such deemed grant or issuance shall forthwith be made effective as of such date. (6) All grants or issuances of options or other rights to acquire shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) issued to any officer, director or employee of the Issuer or of any Subsidiary of the Issuer or to members of the immediate family of any of them ("Management Options"), and all issuances of shares of Common Stock (or securities convertible into or exchangeable for shares of Common Stock) under or pursuant to such Management Options shall, for purposes of subsection 12(c), be deemed to be granted and issued for no consideration except to the extent cash or notes are paid therefor. (7) If and when any Warrants shall be exercised as set forth herein, (i) if there shall be any outstanding warrants (other than the Warrants) or options to purchase or rights to subscribe for shares of Common Stock or any outstanding warrants (other than the Warrants) or options to purchase or rights to subscribe for or securities which are by their terms convertible into or exchangeable for Common Stock which in each case would, if issued on the date of such Warrant exercise, result in an adjustment pursuant to either of subdivisions (3) or (4) of this subsection 12(c), then such warrants or options shall be deemed to have been exercised in full immediately prior to the exercise of such Warrants for a consideration equal to the consideration, if any, received by the Issuer upon the issuance of such options or rights plus the minimum aggregate consideration required to be paid upon exercise of such options or rights (the amount of such consideration to be determined in each case as set forth above), and (ii) if there shall be any outstanding securities which are by their terms convertible into or exchangeable for Common Stock at the time of such warrant exercise or at any time thereafter which in each case would, if issued on the date of such Warrant exercise, result in an adjustment pursuant to subdivision (4) of this subsection, then such securities shall be deemed to have been converted or exchanged in full immediately prior to the exercise of such Warrants for a consideration equal to the aggregate consideration received by the Issuer for any such securities plus the minimum aggregate consideration (not including any amount attributed to the converted or exchanged securities), if any, required to be paid upon the conversion or exchange of such securities (the amount of such consideration to be determined in each case as set forth above); provided that any adjustment made pursuant to this subdivision (7) of subsection 12(c) shall only be made with respect to such Warrants as are then being exercised. (8) Shares of Common Stock owned by or held for the account of the Issuer or any majority-owned Subsidiary shall not be deemed outstanding for the purpose of any computation made pursuant to this subsection 12(c). Any adjustment required to be made pursuant to this subsection 12(c) shall be made successively whenever the date of issuance or deemed issuance of any such Common Stock or any such options, rights or convertible or exchangeable securities is fixed (which date of issuance shall be the record date for such issuance if a record date therefor is fixed) and, in the event that (A) such shares or options, rights, warrants or convertible or exchangeable securities are not so issued, or (B) any such option, right, warrant or convertible or exchangeable security (or the conversion or exchange right thereunder) expires according to its terms without having been exercised, converted or exchanged, each Warrant outstanding shall, as of the date of cancellation of such issuance in the case of clause (A) above and the date of such expiration in the case of clause (B) above, entitle the holder thereof to receive the number of shares of Common Stock or Convertible Preferred Stock as would have been the case had the date of such issuance of such unissued options, rights, warrants or convertible or exchangeable securities not been fixed or such expired options, rights, warrants or convertible or exchangeable securities not been issued, as the case may be. If any adjustment is made pursuant to either of subdivisions (3) or (4) of this subsection 12(c) upon the granting or issuance of any warrants, options or other rights or any convertible or exchangeable securities or any adjustment or readjustment is made pursuant to subdivision (5) of this subsection 12(c), then any adjustment required to be made hereunder upon the exercise of any such warrants, options or other rights or upon the exchange or conversion of any such convertible or exchangeable securities (including any deemed exercise, conversion or exchange pursuant to subdivision (7) of this subsection 12(c)) shall be made only to the extent that the number of shares of Common Stock or Convertible Preferred Stock purchasable upon the exercise of a Warrant shall not previously have been increased pursuant to this subsection 12(c) upon such grant or issuance (or upon such adjustment or readjustment made pursuant to subdivision (5) of this subsection 12(c), if applicable). (d) In case the Issuer shall make a distribution to all holders of Common Stock (including any such distribution made in connection with a consolidation or merger in which the Issuer is the continuing corporation) of evidences of its indebtedness, cash or other assets, each Warrant outstanding on the date of such distribution shall thereafter entitle the holder of such Warrant to receive a number of shares of Common Stock and Convertible Preferred Stock equal to the product of (i) the number of shares of Common Stock and Convertible Preferred Stock to which the holder of such Warrant was entitled immediately prior to such date of distribution and (ii) a fraction of which the numerator shall be the then Current Market Price Per Share of Common Stock on such date and of which the denominator shall be the then Current Market Price Per Share of Common Stock on such date less the fair market value, as determined by agreement between the holders of a majority of the Warrants and the Issuer or, in the absence of such an agreement, by an independent investment banking firm or an independent appraiser engaged by the Issuer and reasonably acceptable to the holders of a majority of the Warrants (in either case the cost of which engagement will be borne by the Issuer) of the portion of the assets or evidences of indebtedness, or the portion of the cash, so to be distributed applicable to one share of then-outstanding Common Stock. Such adjustment shall be made successively whenever a date for such distribution is fixed (which date of distribution shall be the record date for such distribution if a record date therefor is fixed) and, if such distribution is not so made, each Warrant outstanding shall again entitle the holder thereof to receive the number of shares of Common Stock and Convertible Preferred Stock as would have been the case had such date of distribution not been fixed. (e) In the event of any capital reorganization of the Issuer, or of any reclassification of the Common Stock (other than a subdivision or combination of outstanding shares of Common Stock), or in case of the consolidation of the Issuer with or the merger of the Issuer with or into any other corporation or of the sale of the properties and assets of the Issuer as, or substantially as, an entirety to any other corporation, each Warrant shall after such capital reorganization, reclassification of Common Stock, consolidation, merger or sale be exercisable upon the terms and conditions specified in this Warrant Agreement, for the number of shares of stock or other securities or assets to which a holder of the number of Warrant Shares purchasable (at the time of such capital reorganization, reclassification of Common Stock, consolidation, merger or sale) upon exercise of such Warrant would have been entitled upon such capital reorganization, reclassification of Common Stock, consolidation, merger or sale; and in any such case, if necessary, the provisions set forth in this Section 12 with respect to the rights thereafter of the holders of the Warrants shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or assets thereafter deliverable on the exercise of the Warrants. (f) If any event occurs, as to which, in the good faith opinion of the Board of Directors of the Issuer, the other provisions of this Section 12 are not strictly applicable or (if strictly applicable) would not fairly protect the purchase rights of the Warrants in accordance with the essential intent and principles of such provisions, then the Board of Directors shall make an adjustment in the application of such provisions, in accordance with such essential intent and principles, so as to protect such purchase rights as aforesaid, but in no event shall any such adjustment have the effect of decreasing the number of shares of Common Stock or Convertible Preferred Stock purchasable upon the exercise of each Warrant from that which would otherwise be determined pursuant to this Section 12. (g) No adjustment in the number of Warrant Shares purchasable shall be required unless such adjustment would require an increase or decrease in the aggregate number of Warrant Shares purchasable of at least 1%, provided that any adjustments which by reason of this subsection 12(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 12 shall be made to the nearest cent or to the nearest hundredth of a share, as the case may be. (h) Irrespective of any adjustments in the number or kind of shares purchasable upon the exercise of the Warrant, Warrant Certificates theretofore or thereafter issued may continue to express the same number and kind of shares as are stated on the Warrant Certificates initially issuable pursuant to this Warrant Agreement. (i) If any question shall at any time arise with respect to the number of Warrant Shares purchasable following any adjustment pursuant to this Section 12, such question shall be determined by agreement between the holders of a majority of the Warrants and the Issuer or, in the absence of such an agreement, by an independent investment banking firm or an independent appraiser engaged by the Issuer (in either case the cost of which engagement will be borne by the Issuer) and reasonably acceptable to the Issuer and the holders of a majority of Warrants and such determination shall be binding upon the Issuer and the holders of the Warrants. (j) Anything in this Section 12 to the contrary notwithstanding: (1) the Issuer shall be entitled to make such increases in the number of Warrant Shares purchasable upon the exercise of each Warrant, in addition to those adjustments required by this Section 12, as it in its sole discretion shall determine to be advisable in order that any consolidation or subdivision of the Common Stock, or any issuance wholly for cash or any shares of Common Stock at less than the Current Market Price Per Share, or any issuance wholly for cash or shares of Common Stock or securities which by their terms are convertible into or exchangeable for shares of Common Stock or any stock dividend, or any issuance of rights, options or warrants referred to hereinabove in this Section 12, hereinafter made by the Issuer to the holders of its Common Stock shall not be taxable to them; and (2) no adjustment in the number of Warrant Shares purchasable shall be required in the event the Issuer pays a cash dividend to holders of Common Stock and/or Convertible Preferred Stock; provided that the Issuer also pays a cash dividend to all holders of Warrants which dividend shall be calculated as if the Warrants had been exercised. Section 13. Notices to Warrant Holders; Notices of Issuances and Dividends. (a) Upon any adjustment of the number of Warrant Shares purchasable upon exercise of a Warrant pursuant to Section 12, the Issuer shall promptly but in any event within 20 days thereafter, cause to be given to each of the registered holders of the Warrants at its address appearing on the Warrant Register by registered mail, postage prepaid, return receipt requested a certificate signed by its chairman, president or chief financial officer setting forth the number of Warrant Shares purchasable upon exercise of a Warrant as so adjusted and describing in reasonable detail the facts accounting for such adjustment and the method of calculation used. Where appropriate, such certificate may be given in advance and included as a part of the notice required to be mailed under the other provisions of this Section 13. (b) In the event: (i) that the Issuer shall authorize the issuance to all holders of Common Stock or Convertible Preferred Stock of rights or warrants to subscribe for or purchase capital stock of the Issuer or of any other subscription rights or warrants; or (ii) that the Issuer shall authorize the distribution to all holders of Common Stock or Convertible Preferred Stock of evidences of its indebtedness or assets (including, without limitation cash dividends or cash distributions payable out of consolidated earnings or earned surplus or dividends payable in Common Stock or Convertible Preferred Stock); or (iii) of any consolidation or merger to which the Issuer is a party and for which approval of any stockholders of the Issuer is required, or of the conveyance or transfer of the properties and assets of the Issuer substantially as an entirety, or of any capital reorganization or reclassification or change of the Common Stock (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision or combination); or (iv) of the voluntary or involuntary dissolution, liquidation or winding up of the Issuer; or (v) that the Issuer proposes to take any other action which would require an adjustment in the number of Warrant Shares or other securities or assets to which each Warrant Holder is entitled pursuant to Section 12; then the Issuer shall cause to be given to each of the registered holders of the Warrants at its address appearing on the Warrant Register at least 20 calendar days prior to the applicable record date, if any, hereinafter specified, or, if no such record date is specified, 20 calendar days prior to the taking of any action referred to in clauses (i) through (v) above, by registered mail, postage prepaid, return receipt requested, a written notice stating (i) the date as of which the holders of record of Common Stock or Convertible Preferred Stock to be entitled to receive any such rights, warrants or distribution are to be determined, or (ii) the date on which any such consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up is expected to become effective, or (iii) the date on which such other action is to be effected, and the date as of which it is expected that holders of record of Common Stock or Convertible Preferred Stock shall be entitled to exchange their shares for securities or other property, if any, deliverable upon such reclassification, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up or other action. The failure to give the notice required by this Section 13 or any defect therein shall not affect the legality or validity of any distribution, right, warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation or winding up or other action referred to above, or the vote upon any such action. (c) Prior to the expiration or exercise of all outstanding Warrants, the Issuer shall furnish to each Warrant Holder: (i) as soon as available, but in any event within 90 days after the end of each fiscal year of the Issuer, either (A) a copy of the Issuer's Annual Report on Form 10-K (or any successor form) and any documents incorporated by reference into such form for the prior fiscal year, as filed with the Commission under the Exchange Act, or (B) a copy of the consolidated balance sheet of the Issuer and its consolidated Subsidiaries as at the end of such year and the related consolidated statement of income and retained earnings and of cash flow for such year, setting forth in each case in comparative form the figures for the previous year certified by certified independent public accountants not unacceptable to Creditanstalt, and the consolidated balance sheet of the Issuer and its consolidated Subsidiaries as at the end of such fiscal year, showing inter-company eliminations, and the related consolidating statements of income and retained earnings and changes in financial position of the Issuer and its consolidated Subsidiaries for such year, showing inter-company eliminations, setting forth in each case in comparative form the figures for the previous fiscal year, certified by a firm of nationally recognized independent certified public accountants; (ii) as soon as available but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Issuer, either (A) a copy of the Issuer's Quarterly Report on Form 10-Q (or any successor form) for the preceding fiscal quarter, as filed with the Commission under the Exchange Act, or (B) the unaudited consolidated balance sheet of the Issuer and its consolidated Subsidiaries as at the end of each such quarter and the related unaudited consolidated statements of income and retained earnings and of cash flow of the Issuer and its consolidated Subsidiaries for such quarter and the portion of the fiscal year through such date setting forth in each case in comparative form the figures for the same period of the previous fiscal year, reviewed by independent certified public accountants and certified by the chief financial or accounting officer as being fairly stated in all material respects (subject to normal year-end audit adjustments); and (iii) promptly after the sending or filing thereof, as the case may be, copies of any reports, certificates, budgets, definitive proxy statements or financial statements which Issuer sends to its stockholders and copies of any regular periodic and special reports or registration statements which Issuer files with the Commission (or any governmental agency substituted therefor), including, but not limited to, any report or registration statement which Issuer files with any national securities exchange; (iv) no later than April 30 of each year, a certificate of the chairman, president or chief financial officer of the Issuer setting forth the number of Warrant Shares purchasable upon exercise of a Warrant as of the end of the preceding fiscal year and a description in reasonable detail of any adjustments in such number during the preceding fiscal year; all such financial statements to be prepared in reasonable detail and in accordance with generally accepted accounting principles applied consistently throughout the periods reflected therein (except as approved by such accountants and officer and disclosed therein). So long as the Loan Agreement remains in effect, compliance by the Issuer with the provisions of Section 7.2 thereof shall be deemed to be compliance with subsections 13(c)(i) and 13(c)(ii). Section 14. Restrictions on Transfer. (a) Each of Creditanstalt and its Affiliates who are issued Warrants pursuant to this Agreement (i) represents that it is an "accredited investor" within the meaning of the Securities Act and the rules and regulations promulgated thereunder, (ii) represents that it has received adequate information about the Issuer to determine the advisability of a purchase of the Issuer's securities, (iii) represents that it is acquiring the Warrants for its own account for investment and not with a view to any distribution or public offering within the meaning of the Securities Act, except in any case pursuant to the registration of such Warrants or Warrant Shares under the Securities Act or pursuant to a valid exemption from such registration requirement, (iv) acknowledges that the Warrants and the Warrant Shares issuable upon exercise thereof have not been registered under the Securities Act and (v) agrees that it will not sell or otherwise transfer any of its Warrants or Warrant Shares except upon the terms and conditions specified herein and that it will cause any transferee thereof to agree to take and hold the same subject to the terms and conditions specified herein, provided that the Warrant Holders may sell the Warrants or the Warrant Shares purchased upon exercise of the Warrants and issued on conversion of the Convertible Preferred Stock in one or more private transactions not requiring registration under the Securities Act, as provided in Section 14(c) below. (b) Except as provided in subsection 14(d) hereof each Warrant Certificate and each certificate for the Warrant Shares issued to Creditanstalt or an Affiliate thereof or to a subsequent transferee thereof pursuant to subsection 14(c) shall include a legend in substantially the following form (with such changes therein as may be appropriate to reflect whether such legend refers to Warrants or Warrant Shares), provided that such legend shall not be required if such transfer is being made in connection with a sale which is exempt from registration pursuant to Rule 144 under the Securities Act or if the opinion of counsel referred to in subsection 14(c) is to the further effect that neither such legend nor the restrictions on transfer in this Section 14 are required in order to ensure compliance with the Securities Act: THE WARRANTS AND SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAW. SUCH WARRANTS AND SHARES MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN AND ARE SUBJECT TO OTHER PROVISIONS OF THE AMENDED AND RESTATED WARRANT AGREEMENT, DATED AS OF DECEMBER 16, 1997 (AS SUCH AGREEMENT MAY BE AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME), BETWEEN THE ISSUER AND CREDITANSTALT CORPORATE FINANCE, INC., A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE. (c) Prior to or promptly after any assignment, transfer or sale of any Warrant or any Warrant Shares (other than a transfer among Creditanstalt and/or its Affiliates), the holder thereof shall give written notice to the Issuer of such holder's intention to effect such assignment, transfer or sale, which notice shall set forth the date of such proposed assignment, transfer or sale and the identity of the proposed transferee. Each holder wishing to effect such a transfer of any Warrant or Warrant Shares shall also furnish to the Issuer an agreement by the transferee thereof that it is taking and holding the same subject to the terms and conditions specified herein and, unless the transferee is an Affiliate of such holder, a written opinion of such holder's counsel, in form reasonably satisfactory to the Issuer, to the effect that the proposed transfer may be effected without registration under the Securities Act. (d) The restrictions set forth in this Section 14 shall terminate and cease to be effective with respect to any Warrants or Warrant Shares which are registered under the Securities Act or upon receipt by the Issuer of an opinion of counsel, in form reasonably satisfactory to the Issuer, to the effect that compliance with such restrictions is not necessary in order to comply with the Securities Act with respect to the transfer of the Warrants and the Warrant Shares; provided, however, that after two (2) years from the date of issuance of any Warrants (or such shorter period as may be provided by Rule 144(k) promulgated under the Securities Act), such restrictions will automatically terminate (without the necessity of any opinion of counsel) as to such Warrants and as to any Warrant Shares issued in respect of such Warrants upon exercise of the Conversion Right set forth in subsection 6(b) above. Whenever such restrictions shall so terminate the holder of such Warrants and/or Warrant Shares shall be entitled to receive from the Issuer, without expense (other than transfer taxes, if any), Warrant Certificates or certificates for such Warrant Shares not bearing the legend set forth in subsection 14(b) at which time the Issuer will rescind any transfer restrictions relating thereto. (e) With a view to making available to Creditanstalt and its Affiliates and subsequent holders of the Warrant Shares the benefits of certain rules and regulations of the Securities and Exchange Commission (including, without limitation, Rules 144 and 144A under the Securities Act) which may permit the sale of Warrants and Warrant Shares to the public or certain other institutions without registration, the Issuer agrees to take any and all such actions as may be required of it to make available to Creditanstalt and its Affiliates and such subsequent holders such benefits, including without limitation, to: (i) make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act or any successor provision thereto from and after the date the Issuer first becomes subject to the provisions of Section 13 or 15(d) of the Exchange Act; (ii) file with the Commission in a timely manner all reports and other documents required of the Issuer under the Securities Act and the Exchange Act from and after the date the Issuer first becomes subject to the provisions of Section 13 or 15(d) of the Exchange Act; and (iii) so long as Creditanstalt or an Affiliate thereof owns any Warrants or Warrant Shares, furnish to Creditanstalt forthwith upon request a written statement by the Issuer as to its compliance with the reporting requirements of Rule 144 or any successor provision thereto, and of the Securities Act and the Exchange Act, (to the extent not previously furnished to Creditanstalt under subsection 13(d)) a copy of the most recent annual or quarterly report of the Issuer filed with the Commission, in each case from and after the date the Issuer first becomes subject to the provisions of Section 13 or 15(d) of the Exchange Act, and such other reports and documents of the Issuer and other information in the possession of or reasonably obtainable by the Issuer as Creditanstalt and its Affiliates and subsequent holders of the Warrants may reasonably request in availing itself of any rule or regulation of the Commission allowing Creditanstalt and its Affiliates and subsequent holders of the Warrants to sell any such securities without registration. Section 15. Registration. (a) (i) Upon the written demand of any Warrant Holder to the Issuer (a "Demand") at any time and from time to time after the Closing Date requesting that the Issuer effect the registration under the Securities Act of Warrants or Non-Public Warrant Shares of such Warrant Holder, the Issuer will promptly give written notice (a "Demand Notice") of such Demand to all other Warrant Holders. Each other Warrant Holder may request that the Issuer effect the registration under the Securities Act of additional Warrants or Non-Public Warrant Shares of such Warrant Holder by delivering written notice to the Issuer specifying such number of Warrants or Non-Public Warrant Shares within 20 days of receipt of the Demand Notice. In the event that the Issuer receives requests for the registration under the Securities Act of at least an aggregate of 20% of the Warrants or Non-Public Warrant Shares (or if less than an aggregate of 20% of the Warrants or Non-Public Warrant Shares are outstanding, the remainder of the Warrants and Non-Public Warrant Shares then outstanding) within such 20-day period the Issuer shall give written notice (a "Registration Notice") to all Warrant Holders and holders of unregistered Equity Warrant Shares that the Issuer will be filing a registration statement pursuant to this subsection 15(a) and will thereupon use its reasonable best efforts promptly to effect the registration under the Securities Act of (i) the Warrants or Non-Public Warrant Shares which Warrant Holders have requested to be registered within 20 days of the Demand Notice, (ii) additional Warrants and Non-Public Warrant Shares which Warrant Holders have requested to be registered within 10 days of the Registration Notice and (iii) unregistered Equity Warrant Shares which the holders thereof have requested to be registered within 10 days of the Registration Notice. Promptly within 20 days of the Registration Notice, the Issuer will notify all Warrant Holders whose Warrants or Non-Public Warrant Shares are to be included in the registration and all holders of unregistered Equity Warrant Shares whose unregistered Warrant Shares are to be included in the registration of the number of additional Warrants, Non-Public Warrant Shares and unregistered Equity Warrant Shares requested to be included therein. (ii) If the registration of which the Issuer gives notice pursuant to subsection 15(a)(i) is for an underwritten public offering, only Warrants, Non-Public Warrant Shares and unregistered Equity Warrant Shares which are to be included in the underwriting may be included in such registration, and the selling Warrant Holders shall, after reasonable consultation with the Issuer, have the right to designate the managing underwriter(s) in any such underwritten public offering with the consent of the Issuer (which consent shall not be unreasonably withheld). Notwithstanding any other provision of this Section 15(a), if the underwriter advises the Warrant Holders and holders of Equity Warrant Shares in writing that marketing factors require a limitation of the number of Warrants, Warrant Shares and Equity Warrant Shares to be underwritten, then (A) the maximum number of Warrants, Warrant Shares and Equity Warrant Shares to be sold pursuant to such registration shall not exceed the maximum number of Warrants, Warrant Shares and Equity Warrant Shares which the managing underwriter then considers, in good faith, to be appropriate based on market conditions and other relevant factors (including pricing) (the "Maximum Number") and (B) if the total quantity of Warrants, Warrant Shares and Equity Warrant Shares desired to be sold exceeds the Maximum Number, the Warrant Holders shall be entitled to include in the offering the full amount of Warrants and Warrant Shares which they desire to include, provided that if the Maximum Number is insufficient to cover the full amount which the Warrant Holders desire to include, the Warrant Holders, as a group, shall be entitled to sell up to the Maximum Number in proportion to the amount of Warrants and Warrant Shares that each proposes to sell. Only after the Warrant Holders have been entitled to include the full amount of Warrants and Warrant Shares which they desire to include shall the holders of Equity Warrant Shares be entitled to sell Equity Warrant Shares up to the Maximum Number, and, if the Maximum Number is insufficient to cover the full amount which the holders of Equity Warrant Shares desire to include, the holders of Equity Warrant Shares shall be entitled to sell up to the Maximum Number in proportion to the amount of Equity Warrant Shares that each proposes to sell. Holders who include Warrants, Warrant Shares or Equity Warrant Shares in a registration pursuant to subsection 15(a) shall bear the cost of any underwriters' discounts and commissions and transfer taxes, if any, relating to their Warrants, Warrant Shares or Equity Warrant Shares which are sold. (b) The Issuer is obligated to effect any and all demand registrations under subsection 15(a) and, with respect to each such registration, the Issuer shall bear all expenses other than underwriting discounts and commissions, if any, in connection with registrations, filings or qualifications pursuant to subsection 15(a), including without limitation all registration, filing and qualification fees, printers' and accounting fees, the fees and disbursements of counsel for the Issuer and the fees and disbursements of one counsel for the selling Warrant Holders, provided that (i) a registration will not constitute a demand registration under subsection 15(a) until it has been declared effective under the Securities Act, and (ii) no Person other than holders of Warrants, Non-Public Warrant Shares and Equity Warrant Shares shall have any right to have securities included in any registration under subsection 15(a). (c) If, at any time after the date hereof, the Issuer proposes to register any of its securities under the Securities Act (except pursuant to a registration statement filed on Form S-8 or Form S-4 or such other form as shall be prescribed under the Act for the same purposes), it will at each such time give written notice (which notice shall state the intended method of disposition thereof by the prospective sellers) to all holders of outstanding Warrants and Non-Public Warrant Shares of its intention to do so and the proposed minimum offering price per Warrant or Warrant Shares and upon the written request of any holder thereof given within 10 days after the Issuer's giving of such notice, the Issuer will use its reasonable best efforts to effect the registration of the Warrants and/or Non-Public Warrant Shares which it shall have been so requested to register by including the same in such registration statement all to the extent required to permit the sale or other disposition thereof in accordance with the intended method of sale or other disposition given in each such request. If the registration of which the Issuer gives notice pursuant to this subsection 15(c) is for an underwritten public offering, only Warrants or Non-Public Warrant Shares which are to be included in the underwriting may be included in such registration, and the Issuer shall have the right to designate the managing underwriter(s) in any such underwritten public offering; provided that (i) the Issuer shall use its best efforts to cause the managing underwriter(s) to include the Warrants or Non-Public Warrant Shares requested to be included in the registration in the underwriting; (ii) if the managing underwriter(s) advises the holders of the Warrants or Non-Public Warrant Shares in writing that the total amount of securities which they and the Issuer intend to include in such offering is sufficiently large to materially and adversely affect the success of such offering, the amount of securities to be offered for the accounts of all holders or Warrants and Non-Public Warrant Shares shall be reduced pro rata (based upon the amount of securities each such Person sought to include in the offering) to the extent necessary to reduce the total amount of securities to be included in the offering to the amount recommended by such managing underwriter(s) (which amount may be zero, if so recommended by such managing underwriter(s). Any registration statement filed pursuant to this subsection 15(c) may be withdrawn at any time at the discretion of the Issuer. (d) If a registration under subsection 15(a) or 15(c) shall be in connection with an underwritten public offering, each holder of Warrants or Non-Public Warrant Shares shall be deemed to have agreed by acquisition of such Warrants or Non-Public Warrant Shares not to effect any sale or distribution, including any sale pursuant to Rule 144 or Rule 144A, of any Warrants or Non-Public Warrant Shares, and to use such holder's reasonable best efforts not to effect any such sale or distribution of any other equity security of the Issuer or of any security convertible into or exchangeable or exercisable for any equity security of the Issuer (other than as part of such underwritten public offering) within seven days before or 90 days after the effective date of such registration statement (and the Issuer hereby also so agrees and agrees to cause each holder of any equity security, or of any security convertible into or exchangeable or exercisable for any equity security, of the Issuer purchased from the Issuer at any time other than in a public offering, so to agree). (e) As a condition to the inclusion of a holder's Warrants or Non-Public Warrant Shares in any registration statements, each such holder of Warrants or Non-Public Warrant Shares requesting registration thereof will furnish to the Issuer such information with respect to such holder as is required to be disclosed in the registration statement (and the prospectus included therein) by the applicable rules, regulations and guidelines of the Commission promptly upon the Issuer's request for such information. Failure of a holder to furnish such information or agreement shall not affect the obligation of the Issuer under this Section 15 to the remaining holders who furnish such information. (f) If and whenever the Issuer is required under this Section 15 to use its reasonable best efforts to effect the registration of Warrants or Non-Public Warrant Shares under the Securities Act, the Issuer shall: (i) as expeditiously as possible and subject to the limitations set forth in subsections 15(a) and 15(c), prepare and file with the Commission a registration statement on the appropriate form with respect to such Warrants or Non-Public Warrant Shares and use its best efforts to cause such registration statement to become effective as soon as practicable after such filing; (ii) as expeditiously as possible, prepare and file with the Commission such amendments and supplements (including post-effective amendments and supplements) to the registration statement covering such Warrants or Non-Public Warrant Shares and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and usable for resale for a period necessary to complete the distribution of such securities, but in no event in excess of 24 months plus any period during which the holders of Warrants or Warrant Shares are obligated to refrain from selling because the Issuer is required to amend or supplement the prospectus under subsection 15(f)(iv), and to comply with the provisions of the Securities Act with respect to the disposition of all Warrants or Non-Public Warrant Shares covered by such registration statement during such period in accordance with the intended method of disposition of the sellers set forth therein; (iii) as expeditiously as possible, furnish to each seller of such Warrants or Non-Public Warrant Shares registered, or to be registered under the Securities Act, and to each underwriter, if any, of such Warrants or Non-Public Warrant Shares such number of copies of a prospectus and preliminary prospectus in conformity with the requirements of the Securities Act, and such other documents as such seller or underwriter may reasonably request in order to facilitate the public sale or other disposition of such Warrants or Non-Public Warrant Shares; (iv) as expeditiously as possible, notify each seller of such Warrants or Non-Public Warrant Shares if, at any time when a prospectus relating to such Warrants or Non-Public Warrant Shares, is required to be delivered under the Securities Act, any event shall have occurred as a result of which the prospectus then in use with respect to such Warrants or Non-Public Warrant Shares would include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or for any other reason it shall be necessary to amend or supplement such prospectus in order to comply with the Securities Act and prepare and furnish to all sellers as promptly as possible, and in any event within ninety (90) days of such notice, a reasonable number of copies of a supplement to or an amendment of such prospectus which will correct such statement or omission or effect such compliance; (v) as expeditiously as possible, use its reasonable best efforts to register or qualify such Warrants or Non-Public Warrant Shares under such other securities or blue sky laws of such jurisdictions as such seller shall reasonably request and do any and all other acts and things which may be reasonably necessary to enable such seller to consummate the public sale or other disposition in each such jurisdiction of the Warrants or Non-Public Warrant Shares owned by such seller and included in such registration statement, provided that the Issuer shall not be required to consent to the general service of process or to qualify to do business in any jurisdiction where it is not then qualified; (vi) use its reasonable best efforts to keep the holders of such Warrants or Non-Public Warrant Shares informed of the Issuer's best estimate of the earliest date on which such registration statement or any post-effective amendment or supplement thereto will become effective and will promptly notify such holders and the managing underwriters, if any, participating in the distribution pursuant to such registration statement of the following: (A) when such registration statement or any post-effective amendment or supplement thereto becomes effective or is approved; (B) of the issuance by any competent authority of any stop order suspending the effectiveness or qualification of such registration statement or the prospectus then in use or the initiation or threat of any proceeding for that purpose; and (C) of the suspension of the qualification of any Warrants or Non-Public Warrant Shares included in such registration statement for sale in any jurisdiction; (vii) make available to its security holders, as soon as practicable, an earnings statement covering a period of at least twelve months which satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (viii) cooperate with the sellers of such Warrants or Non-Public Warrant Shares and the underwriters, if any, of such Warrants or Non-Public Warrant Shares; give each seller of such Warrants or Non-Public Warrant Shares, and the underwriters, if any, of such Warrants or Non-Public Warrant Shares and their respective counsel and accountants, such access to its books and records and such opportunities to discuss the business of the Issuer with its officers and independent public accountants as shall be necessary to enable them to conduct a reasonable investigation within the meaning of the Securities Act and, in the event that Warrants or Non-Public Warrant Shares are to be sold in an underwritten offering, enter into an underwriting agreement containing customary representations and warranties, covenants, conditions and indemnification provisions, including without limitation the furnishing to the underwriters of a customary opinion of independent counsel to the Issuer and a customary "comfort" letter from the Issuer's independent public accountants; (ix) provide a CUSIP number for all Warrants and Non-Public Warrant Shares not later than the effective date of the registration statement; (x) as to all registrations under subsection 15(a) and all registrations under subsection 15(c), pay all costs and expenses incident to the performance and compliance by the Issuer of this Section 15, including without limitation (A) all registration and filing fees; (B) all printing expenses; (C) all fees and disbursements of counsel and independent public accountants for the Issuer; (D) all blue sky fees and expenses (including fees and expenses of counsel in connection with blue sky surveys); (E) all transfer taxes; (F) the entire expense of any special audits required by the rules and regulations of the Commission; (G) the cost of distributing prospectuses in preliminary and final form as well as any supplements thereto and (H) the fees and expenses of one counsel for the holders of the Warrants or Non-Public Warrant Shares being registered; and (xi) as to the first registration under subsection 15(a) which is in respect of an underwritten offering, as expeditiously as possible, take such actions as the underwriters reasonably request in order to expedite or facilitate the disposition of the Warrants or Non-Public Warrant Shares to be included in such offering (including, without limitation, effecting a stock split, stock dividend or a combination of shares of Common Stock). (g)(i) The Issuer will indemnify and hold harmless each seller of Warrants or Non-Public Warrant Shares, each director, officer, employee and agent of each seller, and each other person, if any, who controls such seller within the meaning of the Securities Act or the Exchange Act from and against any and all losses, claims, damages, liabilities and legal and other expenses (including costs of investigation) caused by any untrue statement or alleged untrue statement of a material fact contained in any registration statement under which such Warrants or Non-Public Warrant Shares were registered under the Securities Act, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to such seller and furnished to the Issuer in writing by such seller expressly for use therein, and provided that the Issuer will not be liable to any Person who participates as an underwriter in the offering or sale of Warrants or Non-Public Warrant Shares or any other Person, if any, who controls such underwriter within the meaning of the Securities Act under the indemnity agreement in this subsection 15(g) with respect to any preliminary prospectus or the final prospectus or the final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such underwriter or controlling Person results from the sale by such underwriter of Warrants or Non-Public Warrant Shares to a Person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Issuer has previously furnished copies thereof to such underwriter, or from a sale to a Person in a state where the offering has not been registered or qualified, if the Issuer has notified the seller and any underwriter involved in such sale of the states where the offering has been registered or qualified. (ii) It shall be a condition to the obligation of the Issuer to effect a registration of Warrants or Non-Public Warrant Shares under the Securities Act pursuant hereto that (X) each seller, severally and not jointly, indemnify and hold harmless the Issuer and each person, if any, who controls the Issuer within the meaning of the Securities Act or the Exchange Act to the same extent as the indemnity from the Issuer in the foregoing paragraph, but only with reference to any breach by such seller of any agreement between such seller, and the Issuer with respect to the offering and with reference to information relating to such seller furnished to the Issuer in writing by such seller expressly for use in the registration statement, any prospectus or preliminary prospectus contained therein or any amendment or supplement thereto and (Y) each seller, in the event that Warrants or Non-Public Warrant Shares are to be sold in an underwritten offering, enters into an underwriting agreement containing customary representations and warranties, covenants, conditions and indemnification provisions. (iii) In case any claim shall be made or any proceeding (including any governmental investigation) shall be instituted involving any indemnified party in respect of which indemnity may be sought pursuant to this subsection 15(g), such indemnified party shall promptly notify the indemnifying party in writing of the same, provided that failure to notify the indemnifying party shall not relieve it from any liability it may have to an indemnified party otherwise than under this subsection 15(g). The indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party in such proceeding and shall pay the fees and disbursements of such counsel. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and disbursements of such counsel shall be at the expense of such indemnified party unless (A) the indemnifying party shall have failed to retain counsel for the indemnified party as aforesaid, (B) the indemnifying party and such indemnified party shall have mutually agreed to the retention of such counsel or (C) representation of such indemnified party by the counsel retained by the indemnifying party would, in the reasonable opinion of the indemnified party, be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding, provided that the Issuer shall not be liable for the fees and disbursements of more than one additional counsel for all indemnified parties. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (h) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in subsection 15(g) is due in accordance with its terms but is for any reason held by a court to be unavailable on grounds of policy or otherwise, the Issuer or the applicable sellers, as the case may be, shall contribute to the aggregate losses, claims, damages and liabilities incurred (including legal or other expenses reasonably incurred in connection with the investigating or defending of same) by the other and for which such indemnification was sought. In determining the amount of contribution to which the respective parties are entitled, there shall be considered the relative benefits received by each party from the offering of the securities included in the registration statement (taking into account the portion of the proceeds of the offering realized by each), the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and any other equitable considerations appropriate in the circumstances; provided, however, that (i) in no case shall any seller of Warrants or Non-Public Warrant Shares be required to contribute any amount in excess of the total public offering price of the Warrants or Non-Public Warrant Shares sold by him and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this subsection 15(h), each person who controls any seller of Warrants or Non-Public Warrant Shares or the Issuer shall have the same rights to contribution as such seller or the Issuer. Any party entitled to contribution shall, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against the Issuer or the seller of Warrants or Non-Public Warrant Shares under this subsection 15(h), notify the Issuer or such seller, as the case may be, but the omission to so notify the Issuer or such seller, as the case may be, shall not relieve it from any other obligation it may have hereunder or otherwise. (i) After the date hereof, the Issuer shall not grant to any holder of securities of the Issuer any registration rights which have a priority greater than or equal to those granted to holders of Warrants or Non-Public Warrant Shares pursuant to this Section 15 without the prior written consent of the holders of at least a majority of the aggregate outstanding Warrants and Non-Public Warrant Shares, voting as a single group. Section 16. Mandatory Redemption, Put Rights and Mandatory Exchange. (a)(i) Subject to the limitations hereinafter set forth, (A) if the Issuer takes any action with respect to its capital stock (including without limitation any purchase of its shares or any combination of shares or reverse stock split and elimination of fractional shares) which would cause the capital stock currently or previously held by or currently issuable without restriction to Creditanstalt and its Affiliates (not including Non-Attributable Stock) to exceed 24.99% of the Equity of the Issuer, then prior to or simultaneously with such action, the Issuer shall purchase from Creditanstalt and/or its Affiliates such number of Warrants, Warrant Shares or other shares of capital stock as will reduce the shares of capital stock currently or previously held by or currently issuable without restriction to Creditanstalt and its Affiliates (not including Non-Attributable Stock) to 24.99% of the Equity of the Issuer (any such mandatory purchase being herein called a "Mandatory Redemption"); and (B) any holder of Warrants and/or Warrant Shares shall have the right at any time, and from time to time, during the Put Period, at its option, upon written notice to the Issuer, to require the Issuer to purchase all or a portion of the Warrants and/or Warrant Shares held by such holder (any such right being herein called a "Put Right"). The price to be paid to the holder upon a Mandatory Redemption or the exercise of a Put Right shall be an amount equal to the Valuation Amount at the date the event causing such Mandatory Redemption occurs or the date the notice exercising such Put Right is given to the Issuer, as the case may be (the "Trigger Date"), multiplied by a fraction the denominator of which is the number of issued and outstanding shares of Common Stock of the Issuer at the Trigger Date, calculated on a fully diluted basis in accordance with generally accepted accounting principles, and the numerator of which is (Y) the aggregate number of shares of Common Stock of the Issuer (i) comprising the Warrant Shares to be purchased by the Issuer, and/or (ii) issuable upon exercise of the Warrants to be purchased by the Issuer, and/or (iii) issuable upon conversion of the Convertible Preferred Stock comprising the Warrant Shares to be purchased by the Issuer, and/or (iv) issuable upon conversion of the Convertible Preferred Stock issuable upon exercise of the Warrants to be purchased by the Issuer (assuming Convertible Preferred Stock, rather than Common Stock, is then issuable under such Warrants), and/or (v) comprising any other shares of capital stock of the Issuer then held or previously held by Creditanstalt or its Affiliates (excluding Non-Attributable Stock) (the "Put Price"). (ii) The Put Rights described in subsection 16(a)(i)(B) shall terminate upon (i) the effectiveness of a registration statement filed by the Issuer with the Commission with respect to a public offering of shares of Common Stock with proceeds paid to the Issuer and any selling stockholders of not less than $40,000,000 or (ii) the consummation by the Issuer of a transaction that constitutes a Non-Surviving Combination. (iii) The completion of all purchases and sales of Warrants and Warrant Shares pursuant to a Mandatory Redemption or the exercise of Put Rights shall take place on the thirtieth (30th) day following respective Trigger Date, unless another date is mutually agreed upon by the Issuer and the selling holder (the "Put Closing Date"). The Put Prices for all such purchases and sales shall be paid by the Issuer issuing to the selling holder in immediately available funds against delivery of certificates representing the Warrants and/or Warrant Shares to be purchased, duly endorsed for transfer to the Issuer. (b) The Put Prices for all purchases and sales of Warrants and Warrant Shares pursuant to exercises of Put Rights shall be determined and calculated in accordance with subsection 16(a) by the Issuer's regularly engaged independent accountants. The Issuer shall cause such accountants to deliver to the Issuer and the selling holder, not later than 15 days prior to the completion of each purchase and sale under subsection 16(a), a written statement, signed by such accountants, setting forth in reasonable detail the respective purchase price and the calculation thereof and stating that such calculation was based on the books and records of the Issuer and was made and delivered pursuant to this Section 16. (c) If the Issuer takes any action with respect to its capital stock (including without limitation any purchase of its shares or any combination of shares or reverse stock split and elimination of fractional shares) which would cause the Common Stock currently or previously held by or currently issuable without restriction to Creditanstalt and its Affiliates (other than shares of Non-Attributable Stock) to exceed 4.99% of the aggregate number of issued and outstanding shares of Common Stock, prior to or simultaneously with such action, the Issuer shall exchange such portion of Common Stock for Convertible Preferred Stock as will reduce the shares of Common Stock currently or previously held by or currently issuable without restriction to Creditanstalt and its Affiliates (not including "Non-Attributable Stock") to 4.99% of the aggregate number of issued and outstanding shares of Common Stock (a "Mandatory Exchange"). (d) As used in this Section 16, "Warrant Shares" shall include all shares of Common Stock and/or Convertible Preferred Stock and other securities of the Issuer or its Affiliates issued to holders of the Issuer's Common Stock and/or Convertible Preferred Stock in respect of stock dividends, stock splits and other distributions and any recapitalizations, to the extent the same were not included in any adjustment of the Warrant Shares issuable upon exercise of Warrants pursuant to Section 12 hereof. (e) The certificates representing the Warrants and the Warrant Shares shall bear a legend indicating that the Warrants and Warrant Shares are subject to the provisions of this Section 16. (f) Notwithstanding any provision of this Warrant Agreement to the contrary, all Warrants and Warrant Shares which are sold pursuant to an effective registration statement under the Securities Act shall, upon such sale, cease to be subject to the provisions of this Section 16. Section 17. Amendments and Waivers. Any provision of this Warrant Agreement may be amended, supplemented, waived, discharged or terminated by a written instrument signed by the Issuer and the holders of not less than a majority of the outstanding Warrants (or in the case of Sections 14, 15 and 16, the holders of a majority of the aggregate outstanding Warrants and Non-Public Warrant Shares, voting as a single group), provided that (i) this Agreement may not be amended, supplemented or waived so as to increase the Exercise Price, reduce the number of Warrant Shares issuable upon exercise of any Warrants, alter the period during which any Warrants may be exercised (except to provide for a later Expiration Date), or reduce the Put Valuation Amount, in each case without the consent of the holders of all outstanding Warrants (and, with respect to any reduction in the Put Valuation Amount, all outstanding Non-Public Warrant Shares), and (ii) this Section 17 may not be amended or supplemented without the consent of the holders of all outstanding Warrants and Non-Public Warrant Shares, voting as a single group, and no waiver of the requirements of this Section 17 shall be binding upon any such holder without its consent. Section 18. Specific Performance. The parties agree that irreparable damage will result in the event that the obligations of the Issuer under this Warrant Agreement are not specifically enforced, and that any damages available at law for a breach of any such obligations would be inadequate. Therefore, the holders of the Warrants and/or Non-Public Warrant Shares shall have the right to specific performance by the Issuer of the provisions of this Warrant Agreement, and appropriate injunctive relief may be applied for and granted in connection therewith. The Issuer hereby irrevocably waives, to the extent that it may do so under applicable law, any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against the Issuer for specific performance of this Warrant Agreement by the holders of the Warrants and/or Non-Public Warrant Shares. Such remedies and all other remedies provided for in this Warrant Agreement shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which may be available under this Warrant Agreement. Section 19. Notices. (a) Any notice or demand to be given or made by the Warrant Holders or the holders of Warrant Shares to or on the Issuer pursuant to this Warrant Agreement shall be sufficiently given or made if sent by registered mail, return receipt requested, postage prepaid, addressed to the Issuer at the Warrant Office. (b) Any notice to be given by the Issuer to the Warrant Holders or the holders of Warrant Shares shall be sufficiently given or made if sent by registered mail, return receipt requested, postage prepaid, addressed to such holder as such holder's name and address shall appear on the Warrant Register or the Common Stock or Convertible Preferred Stock registry of the Issuer, as the case may be. Section 20. Binding Effect. This Warrant Agreement shall be binding upon and inure to the sole and exclusive benefit of the Issuer, its successors and assigns, Creditanstalt, Affiliates of Creditanstalt and the registered holders from time to time of the Warrants and the Warrant Shares. Section 21. Continued Validity. A holder of Warrant Shares shall continue to be entitled with respect to such Warrant Shares to all rights and subject to all obligations to which it would have been entitled or subject as a Warrant Holder under Sections 14 through 24 of this Warrant Agreement. The Issuer will, at the time of each exercise of any Warrant, in whole or in part, upon the request of the holder of the Warrant Shares issued upon such exercise thereof, acknowledge in writing, in form reasonably satisfactory to such holder, its continuing obligation to afford to such holder all such rights, provided, however, that if such holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Issuer to afford to such holder all such rights. Section 22. Counterparts. This Warrant Agreement may be executed in one or more separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Section 23. New York Law. THIS WARRANT AGREEMENT AND EACH WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Section 24. Benefits of This Warrant Agreement. Nothing in this Warrant Agreement shall be construed to give to any Person other than the Issuer and the registered holders of the Warrants and the Warrant Shares any legal or equitable right, remedy or claim under this Warrant Agreement. Section 25. Voting and Consents to be on a Fully Converted Basis. Wherever this Warrant Agreement calls for the written consent or vote of any combinations of the holders of the Warrants, any of the Warrant Shares and/or the Convertible Preferred Stock, voting as a single group, the Warrants shall be counted as if they had been exercised for Common Stock and shares of Convertible Preferred Stock shall be counted as if they had been converted to Common Stock. IN WITNESS WHEREOF the parties hereto have caused this Amended and Restated Warrant Agreement to be duly executed and delivered by their proper and duly authorized officers, as of the date and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein -------------------- Daniel J. Klein Chief Executive Officer Attest: /s/Jamie E. Blech --------------------- Jamie Blech Secretary CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Bibinger ---------------------- Robert M. Biringer Executive Vice President Attest: /s/ Carl Drake --------------------- Carl Drake Senior Associate FIRST AMENDMENT TO AMENDED AND RESTATED WARRANT AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED WARRANT AGREEMENT (this "First Amendment") is made and entered into as of this 31st day March, 1998 by and between IT PARTNERS, INC., a Delaware corporation (the "Issuer") and CREDITANSTALT CORPORATE FINANCE, INC., having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 ("Creditanstalt"). W I T N E S S E T H: WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by the First Amendment to Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further amended by the Second Amendment to Preferred Stock and Warrant Purchase Agreement dated October 27, 1997, as further amended by the Third Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, as further amended by the Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated December 16, 1997, and as amended and restated by the Amended and Restated Preferred Stock and Warrant Purchase Agreement dated January 8, 1998 (the "Original Purchase Agreement") among Issuer, Creditanstalt and certain other parties, Creditanstalt purchased an aggregate of 200,000 shares of the Issuer's Series A Redeemable Preferred Stock with warrants for the purchase of up to 645,587 shares of either the Issuer's common stock, $.01 par value (the "Common Stock") or the Issuer's Convertible Preferred Stock, $.01 par value per share (the "Convertible Preferred Stock"), and 222,222 shares of the Issuer's Convertible Preferred Stock (as such figures may be adjusted pursuant to the terms of the Original Purchase Agreement and the Issuer's Certificate of Incorporation); WHEREAS, in connection with a certain Loan and Security Agreement dated as of May 30, 1997 (the "Loan Agreement") among Issuer, the financial institutions named therein, as lenders (the "Lenders"), Creditanstalt AG, as the issuing bank, and Creditanstalt as the agent for the Lenders (in such capacity, the "Agent"), the Issuer executed and delivered a Warrant Agreement dated as of May 30, 1997, as amended by the First Amendment to Warrant Agreement dated July 11, 1997, as further amended by the Second Amendment to Warrant Agreement dated October 27, 1997, and as amended and restated by the Amended and Restated Warrant Agreement dated December 16, 1997 (the "Warrant Agreement") in favor of Creditanstalt, and issued to Creditanstalt warrants exercisable for up to 612,579 shares of the Issuer's Common Stock or Convertible Preferred Stock; and WHEREAS, Creditanstalt and Issuer desire to amend and restated the Original Purchase Agreement to provide for the purchase of shares of Issuer's Convertible Preferred Stock by Indosuez IT Partners ("Indosuez") and Wachovia Capital Associates, Inc. ("Wachovia"); and WHEREAS, in connection with such proposed purchases of Convertible Preferred Stock by Indosuez and Wachovia, the Issuer and Creditanstalt desire to amend the Warrant Agreement in order to reflect such additional purchases of Convertible Preferred Stock; NOW, THEREFORE, in consideration of the premises, the terms and conditions herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. As used in this First Amendment, unless otherwise defined herein, terms defined in the Warrant Agreement shall have the meaning set forth therein when used herein. Section 2. Equity Warrants. The term "Equity Warrants," as set forth in Section 1 of the Warrant Agreement is hereby deleted in its entirety and the following definition is substituted in lieu thereof: "Equity Warrants" shall mean the warrants issued pursuant to the Purchase Agreement. Section 3. Equity Warrant Shares. The term "Equity Warrant Shares," as set forth in Section 1 of the Warrant Agreement, is hereby deleted in its entirety and the following definition is substituted in lieu thereof: "Equity Warrant Shares" shall mean the shares of Common Stock or Convertible Preferred Stock issued or issuable upon exercise of the Equity Warrants. Section 4. Exempted Securities. The term "Exempted Securities," as set forth in Section 1 of the Warrant Agreement, is hereby deleted in its entirety and the following definition is substituted in lieu thereof: "Exempted Securities" shall mean (A) Warrant Shares and Equity Warrant Shares; (B) shares of the Issuer's capital stock issued as a stock dividend described in subsection 12(b); (C) shares of the Series A Preferred Stock and Convertible Preferred Stock issued pursuant to the Purchase Agreement (as such agreement may be amended, restated, supplemented, or otherwise modified from time to time); (D) shares of Series A Preferred Stock issued as preferred in kind dividends on the Series A Preferred Stock; (E) shares of Common Stock issuable upon conversion of the Convertible Preferred Stock; (F) options and warrants as listed on Schedule I attached hereto and shares of capital stock issuable upon exercise thereof; (G) the Business Combination Options and shares of capital stock issuable upon exercise thereof; (H) options to be granted to employees of the Issuer and its Subsidiaries to purchase up to 351,029 shares of Common Stock of the Issuer at an exercise price of not less than fair market value on the date such option is granted, as determined in good faith by the Board of Directors of the Issuer and giving effect to any Acquisitions consummated on or before such date, and shares of capital stock issuable upon exercise thereof; (I) 103,093 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) for an aggregate purchase price of $200,000; (J) 29,516 shares of Common Stock issued to FF-ITP, L.P. pursuant to the Purchase Agreement; (K) 29,516 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) for an aggregate purchase price of $100,000; (L) 14,758 shares of Common Stock issued to Martin and Haeyoung Kandl (jointly) for an aggregate purchase price of $50,000; (M) 1,001 shares of Common Stock issued to Thomas Gardner for an aggregate purchase price of $3,390. The limits in clauses (E), (H), (I), (J), (K), (L) and (M) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. Section 5. Purchase Agreement. Section 1 of the Warrant Agreement is hereby amended by adding following the definition of "Operating Cash Flow" a new definition of "Purchase Agreement" as follows: "Purchase Agreement" shall mean the Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by the First Amendment to Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further amended by the Second Amendment to Preferred Stock and Warrant Purchase Agreement dated October 27, 1997, as further amended by that certain Third Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, as further amended by the Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated December 16, 1997, as amended and restated by the Amended and Restated Preferred Stock and Warrant Purchase Agreement dated January 8, 1998, and as further amended and restated by the Second Amended and Restated Preferred Stock and Warrant Purchase Agreement dated March 31, 1998 (as such may be amended, restated, supplemented or otherwise modified from time to time), by and between the Issuer, Creditanstalt, FF-ITP, L.P., Credit Agricole Indosuez, Wachovia Capital Associates, Inc., and certain stockholders of the Issuer named therein. Section 6. Representations and Warranties. The Issuer hereby represents and warrants to Creditanstalt, for the benefit of Creditanstalt and any other Warrant Holder, as follows: (a) The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to conduct its business as presently conducted and as intended to be conducted, has the corporate power and authority to execute and deliver this First Amendment, has the corporate power and authority and legal right to own and lease its properties and is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the conduct of its business requires such qualification, except where failure to be so qualified could not be reasonably expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Issuer and its Subsidiaries taken as a whole. (b) The execution, delivery and performance by the Issuer of this First Amendment have been duly authorized by all necessary corporate action and do not and will not violate, or result in a breach of, or constitute a default under, or require any consent under, or result in the creation of any lien, charge or encumbrance upon the assets of the Issuer pursuant to, any law, statute, ordinance, rule, regulation, order or decree of any court, governmental body or regulatory authority or administrative agency having jurisdiction over the Issuer or its Subsidiaries or the Issuer's Certificate of Incorporation or any contract, mortgage, loan agreement, note, lease or other instrument binding upon the Issuer or its Subsidiaries or by which their properties are bound. (c) This First Amendment has been duly executed and delivered by the Issuer and constitutes a legal, valid, binding and enforceable obligation of the Issuer. Section 7. Expenses. Issuer agrees to pay, immediately upon demand by Creditanstalt, all costs, expenses, attorneys' fees, and other charges and expenses incurred by Creditanstalt in connection with the negotiation, preparation, execution and delivery of this First Amendment and any other instrument, document, agreement or amendment executed in connection with this First Amendment. Section 8. Limitation of Amendment. Except as expressly set forth herein, this First Amendment shall not be deemed to waive, amend or modify any term or condition of the Warrant Agreement, each of which is hereby ratified and reaffirmed and shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. Section 9. Counterparts. This First Amendment may be executed in any number of counterparts and any party hereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which, taken together, will be deemed but one and the same agreement. Section 10. Governing Law; Jurisdiction. THIS FIRST AMENDMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW). [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this First Amendment under seal as of the date and year first above written. "ISSUER" IT PARTNERS, INC. By: /s/ Daniel J. Klein --------------------- Daniel J. Klein Chairman of the Board Attest: /s/Jamie E. Blech ------------------ Name:Jamie E. Blech Title: "CREDITANSTALT" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ------------------------- Robert M. Biringer Executive Vice President By: /s/ Carl Drake -------------------------- Carl Drake SECOND AMENDMENT TO AMENDED AND RESTATED WARRANT AGREEMENT THIS SECOND AMENDMENT TO AMENDED AND RESTATED WARRANT AGREEMENT (this "Second Amendment to First Restatement") is made and entered into as of this 27th day of July, 1998 by and between IT PARTNERS, INC., a Delaware corporation (the "Issuer") and CREDITANSTALT CORPORATE FINANCE, INC., having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 ("Creditanstalt"). W I T N E S S E T H: WHEREAS, the Issuer desires to enter into a certain 12% Series C Senior Redeemable Preferred Stock Purchase Agreement, dated as of the date hereof (the "Series C Purchase Agreement"), among Issuer and FBR Business Development Capital ("FBR"), pursuant to which FBR will purchase an aggregate of 700 shares of the Issuer's 12% Series C Senior Redeemable Preferred Stock (the "Series C Preferred Stock"); and WHEREAS, the Company intends to enter into a stock purchase agreement with Wachovia Capital Associates, Inc. ("Wachovia") pursuant to which Wachovia may purchase up to 300 shares of Series C Preferred Stock; and WHEREAS, in connection with a certain Loan and Security Agreement dated as of May 30, 1997 (the "Loan Agreement") among Issuer, the financial institutions named therein, as lenders (the "Lenders"), Creditanstalt AG, as the issuing bank, and Creditanstalt as the agent for the Lenders (in such capacity, the "Agent"), the Issuer executed and delivered a Warrant Agreement dated as of May 30, 1997, as amended by the First Amendment to Warrant Agreement dated July 11, 1997, as further amended by the Second Amendment to Warrant Agreement dated October 27, 1997, (the "Original Warrant Agreement"), as amended and restated by the Amended and Restated Warrant Agreement dated December 16, 1997, and as amended by the First Amendment to Amended and Restated Warrant Agreement dated March 31, 1998 (the "First Restated Warrant Agreement") in favor of Creditanstalt, and issued to Creditanstalt warrants exercisable for up to 612,579 shares of the Issuer's Common Stock or Series B Convertible Preferred Stock (subject to adjustment pursuant to the First Restated Warrant Agreement); and WHEREAS, in connection with the execution, delivery and performance of the Series C Purchase Agreement and the issuance of the Series C Preferred Stock by the Issuer to FBR and Wachovia, the Issuer and Creditanstalt have agreed to amend the First Restated Warrant Agreement and to waive certain provisions thereunder in order to provide for the issuance of the Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock; NOW, THEREFORE, in consideration of the premises, the terms and conditions herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Definitions. As used in this Second Amendment to First Restatement, unless otherwise defined herein, terms defined in the First Restated Warrant Agreement shall have the meaning set forth therein when used herein. Section 2. Schedule I. The First Restated Warrant Agreement is hereby amended by deleting Schedule I in its entirety and substituting in lieu thereof a new Schedule I in the form attached as Schedule I hereto. All references to Schedule I in the Warrant Agreement shall mean new Schedule I attached hereto. Section 3. Schedule II. The First Restated Warrant Agreement is hereby amended by deleting Schedule II in its entirety and substituting in lieu thereof a new Schedule II in the form attached as Schedule II hereto. All references to Schedule II in the Warrant Agreement shall mean new Schedule II attached hereto. Section 4. Series C Preferred Stock. Section 1 of the First Restated Warrant Agreement is hereby amended by adding following the definition of "Series C Issuance Date" a new definition of "Series C Preferred Stock" as follows: "Series C Preferred Stock" shall mean the Issuer's 12% Series C Senior Redeemable Preferred Stock, $.01 par value per share, and shall include any stock into which such Series C Preferred Stock shall have been changed or any stock resulting from any reclassification of such Series C Preferred Stock. Section 5. Series C Purchase Agreement. Section 1 of the Warrant Agreement is hereby amended by adding following the definition of "Series C Preferred Stock" a new definition of "Series C Purchase Agreement" as follows: "Series C Purchase Agreement" shall mean the 12% Series C Senior Redeemable Preferred Stock Purchase Agreement, dated as of July 27, 1998, among Issuer and FBR Business Development Capital (as such may be amended, restated, supplemented or otherwise modified from time to time). Section 6. Waiver of Section 10(c). In connection with the execution, delivery and performance of the Series C Purchase Agreement and the Certificate of Designation of the Series C Preferred Stock, the issuance of shares of Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock, Creditanstalt hereby waives forever the application of the provisions of Section 10(c) (restricting amendments to Issuer's Certificate of Incorporation) and Section 10(d) (restricting the authorization of additional Common Stock) of the Warrant Agreement. Section 7. Representations and Warranties. The Issuer hereby represents and warrants to Creditanstalt, for the benefit of Creditanstalt and any other Warrant Holder, as follows: (a) The Issuer is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to conduct its business as presently conducted and as intended to be conducted, has the corporate power and authority to execute and deliver this Second Amendment to First Restatement, has the corporate power and authority and legal right to own and lease its properties and is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the conduct of its business requires such qualification, except where failure to be so qualified could not be reasonably expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Issuer and its Subsidiaries taken as a whole. (b) The execution, delivery and performance by the Issuer of this Second Amendment to First Restatement have been duly authorized by all necessary corporate action and do not and will not violate, or result in a breach of, or constitute a default under, or require any consent under, or result in the creation of any lien, charge or encumbrance upon the assets of the Issuer pursuant to, any law, statute, ordinance, rule, regulation, order or decree of any court, governmental body or regulatory authority or administrative agency having jurisdiction over the Issuer or its Subsidiaries or the Issuer's Certificate of Incorporation or any contract, mortgage, loan agreement, note, lease or other instrument binding upon the Issuer or its Subsidiaries or by which their properties are bound. (c) This Second Amendment to First Restatement has been duly executed and delivered by the Issuer and constitutes a legal, valid, binding and enforceable obligation of the Issuer. (d) As of the date hereof, and giving effect to all issuances on such date of shares of Series C Preferred Stock and FBR Warrants, the authorized capital stock of Issuer consists of (i) 20,000,000 shares of Common Stock of which 8,279,658 shares are issued and outstanding; and (ii) 6,000,000 shares of Preferred Stock, of which 600,000 shares have been designated Series A Preferred Stock, 347,230 of which are issued and outstanding; 5,000,000 shares have been designated Series B Preferred Stock, 1,387,448 of which are issued and outstanding; and 1,000 shares have been designated Series C Preferred Stock, 700 of which will be issued and outstanding upon the closing of the Second Amendment to First Restatement. An aggregate of 4,000,000 shares of Common Stock are reserved for issuance on the exercise of the Warrants and the Equity Warrants and conversion of the Series B Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are reserved for issuance on exercise of the Warrants and the Equity Warrants. As of the date hereof, an aggregate of 1,000,000 shares of Common Stock are reserved for issuance to employees of Issuer and of Subsidiaries of Issuer. All of the issued and outstanding shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock are, and upon issuance and payment therefor in accordance with the terms of the Series C Purchase Agreement, all of the outstanding Series C Preferred Stock will be, validly issued, fully paid and nonassessable. To the Issuer's best knowledge, other than the Amended and Restated Stockholder Agreement dated March 31, 1998, as amended (as further amended, restated, supplemented or otherwise modified from time to time), there are no voting agreements, voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Issuer or any Subsidiary. Except as set forth on Schedule II hereto, no holder of securities of the Issuer has any right to the registration of such securities under the Securities Act and any applicable state securities law. Section 8. Expenses. Issuer agrees to pay, immediately upon demand by Creditanstalt, all costs, expenses, attorneys' fees, and other charges and expenses incurred by Creditanstalt in connection with the negotiation, preparation, execution and delivery of this Second Amendment to First Restatement and any other instrument, document, agreement or amendment executed in connection with this Second Amendment to First Restatement. Section 9. Limitation of Amendment. Except as expressly set forth herein, this Second Amendment to First Restatement shall not be deemed to waive, amend or modify any term or condition of the Warrant Agreement, each of which is hereby ratified and reaffirmed and shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. Section 10. Counterparts. This Second Amendment to First Restatement may be executed in any number of counterparts and any party hereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which, taken together, will be deemed but one and the same agreement. Section 11. Governing Law; Jurisdiction. THIS SECOND AMENDMENT TO FIRST RESTATEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW). [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to First Restatement under seal as of the date and year first above written. "ISSUER" IT PARTNERS, INC. By:/s/Daniel J. Klein ------------------- Daniel J. Klein Chief Executive Officer Attest:/s/ Jamie Blech ------------------ Jamie Blech President "CREDITANSTALT" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By: /s/John G. Taylor -------------------- Name:John G. Taylor Title: Senior Associate SCHEDULE I List of outstanding options, warrants, subscriptions, rights, convertible or exchangeable securities or other agreements or plans under which the Issuer may be or become obligated to issue, sell or transfer shares of its capital stock or other securities 1. Equity Warrants issued to FF-ITP, L.P. to purchase shares of Common Stock (subject to the adjustments set forth in Section 2.08 of the Preferred Stock and Warrant Purchase Agreement (as amended)) at an exercise price of $.01 per share. 2. Equity Warrants issued to Creditanstalt Corporate Finance, Inc. to purchase shares of Common Stock and/or Series B Preferred Stock (subject to the adjustments set forth in Section 2.08 of the Preferred Stock and Warrant Purchase Agreement (as amended)) at an exercise price of $.01 per share. 3. Shares of the Series B Preferred Stock of Issuer are convertible on a share-for-share basis into Common Stock of the Issuer. 4. Shares of Common Stock issuable as a dividend upon redemption of the Series C Preferred Stock, subject to the provisions of the Issuer's Certificate of Incorporation. The following items are for disclosure purposes only and are not to be included in the definition of "Exempted Securities": 1. Earn out rights granted to certain sellers in connection with Acquisitions consummated by the Issuer. 2. Unsecured Notes convertible into Common Stock, which were issued as a portion of the purchase price in Acquisitions consummated by the Issuer. SCHEDULE II List of Registration Rights 1. Registration rights granted to the Purchasers, Initial Stockholders and Subsequent Stockholders pursuant to the Amended and Restated Stockholder Agreement dated March 31, 1998, as amended by the First Amendment to Amended and Restated Stockholder Agreement (as further amended, restated, supplemented or modified from time to time) by and among the Issuer, Daniel J. Klein, Jamie Blech, Martin F. Kandl and Haeyoung Kandl, Stanley Nice, John Clement, Creditanstalt Corporate Finance, Inc., FF-ITP, L.P., Indosuez IT Partners, Indosuez IT Partners II, Wachovia Capital Associates, Inc., and subsequent stockholders. 2. Registration rights to be granted pursuant to the Series C Purchase Agreement (as amended, restated, supplemented or modified from time to time). EX-4.3 3 AMENDED AND RESTATED STOCKHOLDER AGREEMENT AMENDED AND RESTATED STOCKHOLDER AGREEMENT THIS AMENDED AND RESTATED STOCKHOLDER AGREEMENT (the "Agreement") is made as of March 31, 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Company"), DANIEL F. KLEIN ("Klein"), JAMIE BLECH ("Blech"), MARTIN F. KANDL and HAEYOUNG P. KANDL (collectively, "Kandl"), JOHN CLEMENT ("Clement"), STANLEY NICE ("Nice," together with Klein, Blech, Kandl, Clement and Nice are referred to, as the context requires, individually as an "Initial Stockholder" or collectively as the "Initial Stockholders"), any additional stockholders of the Company listed on the signature pages hereof (the "Subsequent Stockholders"), CREDITANSTALT CORPORATE FINANCE, INC., a Delaware corporation (together with any successor, assignee or transferee, the "Creditanstalt"), FF-ITP, L.P., a Delaware limited partnership ("FF-ITP"), INDOSUEZ IT PARTNERS (together with any successor, assignee or transferee, "Indosuez"), WACHOVIA CAPITAL ASSOCIATES, Inc., a Georgia corporation, (together with any successor, assignee or transferee, "Wachovia", which, together with the Creditanstalt, FF-ITP and Indosuez are, as the context requires, referred to herein individually as a "Purchaser" and collectively as the "Purchasers"). The Initial Stockholders, Subsequent Stockholders, and Purchasers shall be collectively referred to herein, as the context requires, as the "Stockholders." W I T N E S E T H: WHEREAS, the Company, Klein, Blech, Kandl, Clement, Nice, Creditanstalt, and FF-ITP are parties to that certain Stockholder Agreement, dated as of May 30, 1997, as amended by the First Amendment to Stockholder Agreement dated as of July 11, 1997, as further amended by the Second Amendment to Stockholder Agreement dated as of October 17, 1997, as further amended by the Third Amendment to Stockholder Agreement dated as of October 27, 1997, as further amended by the Fourth Amendment to Stockholder Agreement dated as of October 31, 1997, as further amended by the Fifth Amendment to Stockholder Agreement dated as of December 16, 1997 (as amended, the "Original Stockholder Agreement"); and WHEREAS, the Company, Creditanstalt, FF-ITP, Indosuez, and Wachovia wish to enter into a Second Amended and Restated Preferred Stock and Warrant Purchase Agreement dated as of the date hereof (the "Purchase Agreement"), which provides for the issuance by the Company of its Series B Convertible Preferred Stock to Indosuez and Wachovia (the "Additional Equity Investments"); and WHEREAS, the Purchasers are willing to enter into and consummate the transactions contemplated by the Purchase Agreement only if, among other things, the Company and each Stockholder enter into, and perform under, this Agreement; and WHEREAS, the parties hereto wish to amend and restate the Original Stockholder Agreement in order to provide for the Additional Equity Investments and to make certain other changes set forth herein; and WHEREAS, each Stockholder owns beneficially and of record the number of shares or share equivalents of the issued and outstanding capital stock of the Company as set forth on Exhibit A attached hereto; and WHEREAS, the parties hereto acknowledge that the Company intends to continue to engage in a program of acquiring assets (including the stock or other ownership interests of Persons which are identified by the Company as acquisition targets) in consideration for the Company's Capital Stock and certain other consideration and acknowledge that each Person acquiring Capital Stock of the Company, and any successor, assignee or transferee of a Purchaser, will be required to execute a joinder agreement, in form and substance substantially similar to Exhibit B attached hereto, pursuant to which such person shall consent to be bound by all the terms and provisions hereof. Exhibit A shall be deemed automatically amended by the Stockholders to reflect the addition of a Subsequent Stockholder or a Purchaser pursuant to this Agreement; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchaser, the Stockholders, and the Company, intending to be legally bound, agree as follows. ARTICLE I DEFINITIONS As used in this Agreement, the following terms have the meanings indicated. "Acquisition Stock". This term shall mean Common Stock of the Company issued subsequent to the Original Closing Date in consideration for the acquisition of all or substantially all the assets (including the stock or other ownership interests) of Persons that are identified by the Company as acquisition targets, provided that the Fair Market Value of such Common Stock as well as other consideration paid by the Company for such assets is not unreasonably disproportionate to the fair market value of the assets being acquired, as determined by the Company's Board of Directors or its executive committee. "Adjustment Event". Any event in which (a) the Company issues any shares of Capital Stock in an Adjustment Public Offering for consideration per share that exceeds the amount received per share by any Purchaser in connection with the exercise of the Call Option with respect to such Purchaser; (b) any Person acquires Capital Stock in connection with the acquisition of the beneficial ownership of more than fifty percent (50%) of the voting securities of the -2- Company, or acquires Capital Stock and the right to elect a majority of the members of the Company's board of directors for a consideration per share or unit that exceeds the amount received per share by any such Purchaser in connection with the exercise of such Call Option; (c) the Company sells all or a majority of its assets or revenue or income generating capacity for such amount of consideration that, if the Company were liquidated on the date that such sale is consummated, the holders of any class of Capital Stock would receive per share distributions exceeding the amount received per share by any such Purchaser in connection with the exercise of such Call Option; or (d) the Company participates in any merger, consolidation, reorganization, share exchange, recapitalization, or similar transaction or series of related transactions involving a change of control of the Company or disposition of all or a majority of its assets or revenue or income generating capacity, directly or indirectly, in which the holders of any class of Capital Stock receive per share consideration for, or distributions with respect to, their shares in an amount that exceeds the amount received per share by such Purchaser in connection with the exercise of such Call Option. "Adjustment Public Offering". Each public offering of shares of any class of Capital Stock pursuant to a registration statement filed with the Commission. "Affiliate". With respect to any Person, (a) a Person that, directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with, such Person; (b) any Person of which such Person or such Person's spouse is an officer, director, security holder, partner, or, in the case of a trust, the beneficiary or trustee, and (c) any Person that is an officer, director, security holder, partner, or, in the case of a trust, the beneficiary or trustee of such Person. The term "control" as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. In addition, as to any Purchaser, "Affiliate" shall include any partnership a majority of the partners of which are officers, directors, employees or Affiliates of such Purchaser, and as to the Company, "Affiliate" shall not include any Purchaser or any Affiliate of any Purchaser. "Appraised Value". The value determined in accordance with the following procedures. For a period of thirty (30) days after the date of a Valuation Event (the "Negotiation Period"), the Purchasers and the Company agree to negotiate in good faith to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by an Appraiser. An "Appraiser" shall be a recognized appraisal or investment firm with experience in making determinations of value of the type required to be made under this definition. If the Purchasers and the Company cannot agree on an Appraiser within thirty (30) days after the end of the Negotiation Period, the Company, on the one hand, and the Purchasers, on the other hand, shall each select an Appraiser within forty (40) days after the end of the Negotiation Period and those two Appraisers shall select within fifty (50) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for -3- minority interests. Such independent Appraiser shall be directed to determine fair market value of such securities or property as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parties to this Agreement. Appraised Value of each share of Common Stock at a time when (i) the Company is not a reporting company under the Securities Exchange Act of 1934, as amended, and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole (plus the exercise price of all options, warrants and other rights to acquire Capital Stock of the Company having an exercise price per share less than the Fair Market Value of such Capital Stock) and dividing that value by the sum of (x) the number of shares of Common Stock then outstanding plus (y) the number of shares of Common Stock Equivalents, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. The costs of the Appraiser or Appraisers will be borne by the Company. In no event will the Appraised Value of the Common Stock or Other Securities be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class as the Other Securities, as the case may be, in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. The prevailing market prices for any security or property will not be dispositive of the Appraised Value thereof. "Average Market Value". The average of the closing prices for the security in question for the thirty (30) trading days immediately preceding the date of determination. "Book Value". With respect to shares of Common Stock an amount equal to the quotient determined by dividing (a) the sum of (x) the total consolidated assets of the Company shown on the most recent regularly prepared consolidated balance sheet of the Company prior to the date of the Valuation Event in question minus (y) the total consolidated liabilities of the Company as shown on the most recent regularly prepared consolidated balance sheet of the Company prior to the date of the Valuation Event by (b) the aggregate number of shares of Common Stock and Common Stock Equivalents as of the date of the Valuation Event. "Business Combination Options". This term shall mean options to purchase Common Stock of the Company that (a) are issued to employees of the Company or of Subsidiaries of the Company hired after the Original Closing Date; (b) in the aggregate do not exceed 12% of the Acquisition Stock issued by the Company; and (c) have an exercise price equal to the Fair Market Value on the date such options are granted, giving effect to any such acquisition consummated on such date. "Buyer". This term is defined in Section 6.02(a)(ii). "Call Option". This term is defined in Section 5.01. "Call Option Closing". This term is defined in Section 5.04. "Call Option Period". This term is defined in Section 5.01. "Capital Stock". As to any Person, its common stock and any other -4- capital stock of such Person authorized from time to time, and any other shares, options, interests, participations, or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock (including the Series A Preferred Stock and the Series B Preferred Stock), phantom stock, stock appreciation rights, convertible notes or debentures, stock purchase rights, and all agreements, instruments, documents, and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. "Closing Date". March 31, 1998. "Common Stock". The common stock, $ .01 par value, of the Company. "Common Stock Equivalent". Any option, warrant, right, or similar security exercisable into, exchangeable for, or convertible to Common Stock. "Conversion Shares". Shares of Common Stock issued or issuable upon conversion of the Series B Preferred Stock. "Co-Sell Shares". This term is defined in Section 6.02(d). "Co-Sellers". This term is defined in Section 6.02(d). "Election Notice". This term is defined in Section 6.02(b). "Event of Default". This term shall mean any default by the Company or a Stockholder (other than a Purchaser) under this Agreement and the failure to cure such default within thirty (30) days after notice of the same. "Excess Consideration". The amount that a Purchaser would have realized following the Adjustment Event had the Call Option not been exercised by the Company until such time, minus the amount that such Purchaser realized due to the exercise of the Call Option; provided, however, that the amount of Excess Consideration will in all events be deemed to be at least zero. "Exchange Common Stock". This term is defined in Section 7.12. "Exchange Company". This term is defined in Section 7.12. "Exchange Notice". This term is defined in Section 7.12. "Fair Market Value". (a) As to securities regularly traded in the organized securities markets, the Average Market Value; and (b) As to all securities not regularly traded in the securities markets and other property, the fair market value of such securities or property as determined in good faith by disinterested members of the Board of Directors of the Company at the time it authorizes the transaction (a "Valuation Event") requiring a determination of Fair Market Value under this Agreement; provided, however, that, at the election of the Purchasers, or if there are no disinterested members of the Board of Directors of the Company, the Fair Market Value of such securities and other property will be the Appraised Value. "GAAP". Generally accepted accounting principles, consistently applied. -5- "Issuable Warrant Shares". Shares of Common Stock or Other Securities issuable on exercise of the Warrants. "Issued Warrant Shares". Shares of Common Stock or Other Securities issued on exercise of the Warrants. "Loan Agreement". This term shall mean that Amended and Restated Loan and Security Agreement, dated as of the Closing Date, between the Company, the Lenders named therein, Creditanstalt as the LC Issuer, Indosuez as the Co- Agent and Creditanstalt as the Administrative Agent and Collateral Agent (as such agreement may be amended, restated, supplemented or modified from time to time). "Loan Warrant Agreement". This term shall mean the Amended and Restated Warrant Agreement, dated as of December 16, 1997, between the Company and Creditanstalt (as such agreement may be amended, restated, supplemented or modified from time to time). "Loan Warrants." This term shall mean the stock purchase warrants issued pursuant to the Loan Warrant Agreement (in the percentages and to the extent, and subject to adjustment, as provided in the Loan Warrant Agreement) and all warrants issued upon the transfer or the division of, or in substitution for, such Loan Warrants. "Loan Warrant Shares". Shares of Common Stock or Other Securities issued on exercise of the Loan Warrants. "Major Stockholder". This term is defined in Section 6.01. "New Securities". Any Capital Stock of the Company, other than Warrant Shares, Loan Warrant Shares and the Permitted Stock. "Notice of Sale". This term is defined in Section 6.02(a). "Operating Cash Flow". This term shall mean, for any Person, for any period for which the same is computed, the sum of (a) such Person's net income (loss) for such period, plus (b) such Person's interest expense for such period, plus (c) such Person's depreciation and amortization for financial reporting purposes for such period, plus (d) income tax expense for such period, computed in each case on a consolidated basis for such Person and its consolidated Subsidiaries in accordance with GAAP. "Original Closing Date". May 30, 1997. "Other Securities". Any stock, other securities, property, or other property or rights (other than Common Stock) that the Holders become entitled to receive upon exercise of the Warrants, including, but not limited to, the Series B Preferred Stock. "Permitted Stock". (a) Issuable or Issued Warrant Shares, Conversion Shares, Loan Warrant Shares and shares of the Company's Capital Stock issuable upon conversion thereof; (b) Capital Stock of the Company issued as a dividend on shares of the Company's Capital Stock or as a result of a stock split with respect thereto; (c) options and warrants granted (or for which the Board of Directors has approved the grants to specified individuals) as of the date hereof to purchase the Company's Capital Stock, and shares of the Company's Capital Stock issuable upon exercise thereof; (d) the Business Combination -6- Options, and shares of the Company's Capital Stock issuable upon exercise thereof; (e) options to be granted after the Original Closing Date to employees of the Company and its Subsidiaries to purchase up to 335,286 shares of Common Stock of the Company, at the exercise price not less than the Fair Market Value at the time of issuance of such options, and shares of the Company's Capital Stock issuable upon exercise thereof; (f) shares of Series A Preferred Stock issuable pursuant to the Purchase Agreement; (g) shares of Series B Preferred Stock issuable pursuant to the Purchase Agreement; (h) 103,093 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $200,000; (i) solely for the purpose of Article II of this Agreement, Acquisition Stock; (j) 29,516 shares of Common Stock issuable to FF-ITP pursuant to the Purchase Agreement; (k) 29,516 shares of Common Stock issuable to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $100,000; (l) 14,758 shares of Common Stock issuable to Martin and Haeyoung Kandl (jointly) at an aggregate purchase price of $50,000; and (m) 1,001 shares of Common Stock issuable to Thomas Gardner at an aggregate purchase price of $3,390. The limits in clauses (e), (h), (j), (k), (l) and (m) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. "Person". This term will be interpreted broadly to include any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, company, institution, entity, party, or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body, or department of any of the foregoing). "Preferred Shares". The Series A Preferred Stock and Series B Preferred Stock. "Purchase Agreement". This term shall mean the Second Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of the Closing Date, between the Company, the Purchasers, Klein and Blech (as such agreement may be amended, restated, supplemented or modified from time to time). "Purchaser". This term is defined in the preamble. "Put Option". This term is defined in Section 4.01. "Put Option Closing". This term is defined in Section 4.05. "Put Option Period". This term is defined in Section 4.01. "Put Price". This term is defined in Section 4.02. "Put Shares". The Warrant Shares plus any other shares of Capital Stock owned from time to time by a Purchaser which were issued in respect of the Warrant Shares. "Registrable Securities". (a) The Issuable Warrant Shares, (b) the Issued Warrant Shares, (c) the Preferred Shares and (d) the Conversion Shares that, in each case, have not been previously sold to the public. "Regulated Holder". Any Purchaser or any Affiliate of any Purchaser subject to the provisions of (a) the Bank Holding Company Act of 1956, as -7- amended; (b) Regulation Y of the Board of Governors of the Federal Reserve System (12 C.F.R. part 225), or (c) any law, rule or regulation that is a successor to either of the foregoing; provided that a "Regulated Holder" shall not include a Purchaser or an Affiliate of a Purchaser that is a small business investment company licensed by the Small Business Administration. "Related Party". An entity wholly owned by a Selling Stockholder or one or more Related Parties, or an Affiliate of a Selling Stockholder. "Selling Stockholder". This term is defined in Section 6.02. "Securities Act". The Securities Act of 1933, as amended, and the rules and regulations thereunder. "Series A Preferred Stock". Series A Preferred Stock, $.01 par value, of the Company having the rights, restrictions, privileges and preferences of the series of preferred stock designated as "Series A Preferred Stock" set forth in the Certificate of Incorporation of the Company. "Series B Preferred Stock". Series B Preferred Stock, $.01 par value, of the Company having the rights, restrictions, privileges and preferences of the series of preferred stock designation as "Series B Preferred Stock" set forth in the Certificate of Incorporation of the Company. "Stockholder". This term is defined in the preamble. "Subsequent Stockholder". This term is defined in the preamble. "Subsidiary". Each Person of which or in which the Company or its other Subsidiaries own directly or indirectly fifty percent (50%) or more of (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors or equivalent body of such Person, if it is a corporation or similar person; (ii) the capital interest or profits interest of such Person, if it is a partnership, joint venture, or similar entity; or (iii) the beneficial interest of such Person, if it is a trust, association, or other unincorporated organization. "Valuation Amount" shall mean, as of any date, the greater of (x) zero or (y) an amount equal to Operating Cash Flow for the most recently ended twelve months preceding the date of determination multiplied by six (6), less the principal amount of Indebtedness of the Company on such date of determination, plus the aggregate amount of cash and/or cash equivalents held by the Company on such date of determination. "Valuation Event". This term is defined in the definition of Fair Market Value. "Warrants". All warrants issued pursuant to the Purchase Agreement (in the percentages and to the extent, and subject to adjustment, as provided in the Purchase Agreement) and all Warrants issued upon the transfer or the division of, or in substitution for, such Warrants. "Warrant Shares". The Issuable Warrant Shares and the Issued Warrant Shares. -8- ARTICLE II STOCKHOLDERS' PREEMPTIVE RIGHTS 2.01 Preemptive Rights. The Company will not issue or sell any New Securities without first complying with this Article II. The Company hereby grants to each Stockholder the preemptive right to purchase, pro rata, all or any part of the New Securities that the Company may, from time to time, propose to sell or issue. Each Stockholder's pro rata share for purposes of Article II is the ratio that the number of shares of Common Stock owned of record by or issuable to such Stockholder upon full exercise of all outstanding options, warrants or other rights to acquire Common Stock or securities convertible into Common Stock and full conversion of all securities convertible into Common Stock, all calculated immediately prior to the issuance of the New Securities, bears to the total number of shares of Common Stock then outstanding assuming full exercise or conversion, as the case may be, of all outstanding securities exercisable for or convertible into Common Stock. 2.02 Notice. In the event the Company proposes to issue or sell New Securities, it will give each Stockholder written notice of its intention, describing the type of New Securities and the price and terms upon which the Company proposes to issue or sell the New Securities. Each Stockholder will have ten (10) days from the date of receipt of any such notice and such information as such Stockholder may reasonably request to facilitate such Stockholder's investment decision to agree to purchase up to such Stockholder's pro rata share of the New Securities for the price (valued at Fair Market Value for any noncash consideration) and upon the terms specified in the notice by giving written notice to the Company stating the quantity of New Securities agreed to be purchased. 2.03 Allocation of Unsubscribed New Securities. In the event a Stockholder fails to exercise such preemptive right within such ten (10) day period, the other Stockholders, if any, will have an additional five (5) day period to purchase such Stockholder's portion not so agreed to be purchased in the same proportion in which such other Stockholders were entitled to purchase the New Securities (excluding for such purposes such nonpurchasing Stockholder). Thereafter, the Company will have ninety (90) days to sell the New Securities not elected to be purchased by the Stockholders at the same price and upon the same terms specified in the Company's notice described in Section 2.02. In the event the Company has not sold the New Securities within such ninety (90) day period, the Company will not thereafter issue or sell any New Securities without first offering such securities in the manner provided above. -9- ARTICLE III DILUTION FEE In the event that, during the term of the Warrants, the Company pays any cash dividend or makes any cash distribution to any holder of any class of its Capital Stock with respect to such Capital Stock, each holder of the Warrants will be entitled to receive in respect of its Warrant a dilution fee in cash (the "Dilution Fee") on the date of payment of such dividend or distribution, which Dilution Fee will be equal to the difference between (a) the highest amount per share paid to any class of Capital Stock times the number of Issuable Warrant Shares then owned by such holder, and (b) the amount of such dividend or distribution otherwise paid to such holder as a result of its ownership of Capital Stock. This provision shall not apply to the payment of cash dividends on the Series A Preferred Stock. ARTICLE IV PUT OPTION 4.01 Grant of Option. The Company hereby grants to each Purchaser an option to sell to the Company, and the Company is obligated to purchase from each Purchaser under such option (the "Put Option"), all (or such portion as is designated by any such Purchaser pursuant to Section 4.03 below) of the Put Shares owned by such Purchaser. The Put Option will be effective at any time or times after the five-year and six-month anniversary of the date of issuance of such Put Shares, or at any time or times after the occurrence of the following events (the "Put Option Period"). (a) Subject to such Purchaser obtaining any required consents or waivers under the Loan Agreement, a merger, consolidation, share exchange, or similar transaction involving the Company, as a result of which stockholders of the Company immediately prior to such acquisition possess a minority of the voting power of the acquiring entity immediately following such acquisition, or sale in one or more related transactions of all or a substantial portion of the assets, business, or revenue or income generating operations of the Company or any substantial change in the type of business conducted by the Company; or (b) After the occurrence and during the continuance of an Event of Default or any failure of the Company in any material respect to perform or comply with any of its obligations hereunder; provided, however, that the Put Option Period will continue with respect to such Event of Default or other failure, even after the same has been cured, if notice of exercise of the Put Option by such Purchaser is provided pursuant to this Article IV during the continuance of such Event of Default or such other failure, as the case may be. 4.02 Put Price. In the event that any Purchaser exercises the Put Option, the price (the "Put Price") to be paid to each such Purchaser pursuant to this Agreement will be cash in the sum of the amount determined by multiplying the higher of (a) the Book Value or (b) the Fair Market Value per share of Common Stock as of the end of the month immediately preceding the date notice is given of the exercise of the Put Option pursuant to Section 4.03 times the number of shares of Common Stock which were issued upon exercise of the Warrants for which the Put Option is being exercised by such Purchaser plus the higher of (a) the Book Value or (b) the Fair Market Value -10- of the Other Securities issuable upon exercise of the portion of the Warrants subject to the Put Option. 4.03 Exercise of Put Option. The Put Option may be exercised during the Put Option Period with respect to all or any portion of the Put Shares. Such option shall be exercised by such Purchaser giving notice to the Company and each other Purchaser during the Put Option Period of the Purchaser's election to exercise the Put Option, and the date of the Put Option Closing, which will be not less than fifteen (15) nor more than ninety (90) days after the date of such notice. The Company will provide each Purchaser desiring to exercise its Put Option the name and address of each other Purchaser. Notwithstanding the foregoing, if a Purchaser receives such notice of another Purchaser's exercise of such other Purchaser's Put Option, the Purchaser receiving such notice may elect to exercise its Put Option and designate a Put Option Closing simultaneous and pari passu with that of such other Purchaser. 4.04 Certain Remedies. In the event that the Company defaults in its obligation to purchase all or any portion of the Put Shares upon exercise of the Put Option, in addition to any other rights or remedies of each Purchaser, the unpaid portion of the Put Price will bear interest at the lesser of (a) eighteen percent (18%) per annum, compounded monthly, or (b) the highest rate permitted by applicable law. The Company will, upon the request of any Purchaser, execute and deliver to such Purchaser a promissory note in form and substance satisfactory to such Purchaser evidencing such obligation. 4.05 Put Option Closing. The closing for the purchase and sale of all or such portion of the Put Shares as to which the Purchaser has notified the Company of its intention to exercise the Put Option, will take place at the office of the Company on the date specified in such notice of exercise (a "Put Option Closing"). At any Put Option Closing, to the extent applicable, the Purchaser of the Put Shares will deliver the certificate or certificates evidencing the Put Shares being purchased, duly endorsed in blank. In consideration therefor, the Company will deliver to the Purchaser the Put Price, which will be payable in cash. ARTICLE V CALL OPTION 5.01 Grant of Option. Each Purchaser hereby severally grants to the Company an option to require such Purchaser to sell to the Company, and each Purchaser is obligated to sell to the Company under this option (the "Call Option"), all (but not less than all) of the Warrants and Warrant Shares issued to such Purchaser. The Call Option will be effective after the tenth (10th) anniversary of the Original Closing Date (the "Call Option Period"). 5.02 Call Price. In the event that the Company exercises the Call Option, the exercise price to be paid in cash to each Purchaser will be equal to the Put Price determined in accordance with Section 4.02, except that the Call Option will be exercised with respect to all of the Warrants and all Warrant Shares, and will be increased by an amount in cash equal to any Excess Consideration received within one year following the exercise of the Call Option. 5.03 Exercise of Call Option. The Call Option may be exercised during the Call Option Period with respect to all of the Warrants and the Warrant -11- Shares of the Purchasers, by the Company giving notice to each Purchaser during the Call Option Period of the election of the Company to exercise the Call Option, and the date of the Call Option Closing (as defined below), which in all events will be within at least ten (10) days after the date of such notice. 5.04 Call Option Closing. The closing for the purchase and sale of all of the Warrants and Warrant Shares that the Company has elected to purchase under this Agreement, will take place at the office of the Company, on the date specified in such notice of exercise (the "Call Option Closing"). At the Call Option Closing, the Purchasers will deliver the Warrants and the certificate or certificates representing the Warrant Shares, duly endorsed in blank. In consideration therefor, the Company will deliver to each Purchaser the purchase price, which will be payable in immediately available funds. ARTICLE VI FIRST REFUSAL AND CO-SALE RIGHTS 6.01 Rights of Co-Sale. In the event that any Initial Stockholder or Subsequent Stockholder owning more than one percent (1%) of the Capital Stock (including all Issued Warrant Shares) of the Company (a "Major Stockholder") intends to sell or transfer, directly or indirectly, any shares of any class of Capital Stock held by it to any Person other than a Related Party, each Purchaser will have the right to participate in such sale or transfer on the terms set forth in this Article VI; provided, however, none of the provisions of this Agreement will apply to any sale by a Major Stockholder of shares of Capital Stock (a) pursuant to Rule 144 promulgated under the Securities Act; (b) in a bona fide underwritten public offering under the Securities Act, so long as all Purchasers have had an opportunity to participate in such offering pursuant to the registration rights under this Agreement or under the Loan Warrant Agreement; or (c) pursuant to the exercise of the Company's repurchase options under those Stock Repurchase Agreements dated May 30, 1997, between the Company and each of Daniel F. Klein and Jamie Blech. 6.02 Method of Electing Sale: Allocation of Sales. No sale or transfer by any Initial Stockholder or Subsequent Stockholder of any shares of Capital Stock will be valid unless the transferee of such Capital Stock first agrees in writing to be bound by the same terms and conditions that apply to the Initial Stockholder or Subsequent Stockholder under this Agreement. In addition, before any shares of Capital Stock held, directly or indirectly, by any Major Stockholder may be sold or transferred to a Person other than a Related Party, the Major Stockholder (as such, the "Selling Stockholder") will comply with the following provisions: (a) The Selling Stockholder will deliver or cause to be delivered a written notice (the "Notice of Sale") to each Purchaser at least fifteen (15) days prior to making any such sale or transfer. The Company agrees to provide the Selling Stockholder with a list of the names and addresses of each such Purchaser for such purpose. The Notice of Sale will include (i) a statement of the Selling Stockholder's bona fide intention to sell or transfer; (ii) the name and address of the prospective transferee (the "Buyer"); (iii) the number of shares of Capital Stock of the Company to be sold or transferred; (iv) the terms and conditions of the contemplated sale or transfer; (v) the purchase price in cash that the Buyer will pay for such shares of Capital Stock; (vi) the expected closing date of the transaction; and (vii) such other information -12- as the Purchasers may reasonably request to facilitate their decision as to whether or not to exercise the rights granted by this Article VI. (b) Any Purchaser receiving the Notice of Sale may elect to participate in the contemplated sale or transfer by exercising either (i) its right of first refusal to purchase such Capital Stock pursuant to Section 6.02(c) or (ii), its right to co-sell its Capital Stock pursuant to Section 6.02(d). Either of such rights may be exercised in the sole discretion of the Purchaser by delivering a written notice (an "Election Notice") to the Company and the Selling Stockholder within fifteen (15) days after receipt of such Notice of Sale stating the election of the Purchaser to exercise either its right of first refusal pursuant to Section 6.02(c) or its right of co-sale pursuant to Section 6.02(d). (c) Each Purchaser may elect to treat the Notice of Sale as an irrevocable offer to sell to the Purchaser up to its pro rata share (determined in accordance with the following sentence, and including the pro rata share of Capital Stock not purchased by other Purchasers) of the number of shares of Capital Stock proposed to be sold to the Buyer on the same per share terms and conditions as stated in the Notice of Sale. Each Purchaser's pro rata share for purposes of Article VI is the ratio that the number of shares of Common Stock issuable to such Purchaser upon exercise of its Warrants and conversion of its shares of Series B Preferred Stock, plus the number of shares of Common Stock that are Issued Warrant Shares or Conversion Shares, owned by such Purchaser, bears to the sum of (x) the total number of shares of Common Stock then outstanding, plus (y) the number of shares of Common Stock issuable upon exercise of all Warrants and conversion of all Series B Preferred Stock. Such offer will remain open for a period of fifteen (15) days from delivery to the Purchaser of the Election Notice. Within such fifteen (15) day period, the Purchaser may elect to accept such offer in whole or in part by delivering to the Selling Stockholder written notice of its irrevocable election to accept such offer. If the Purchaser irrevocably accepts such offer, the closing of the purchase and sale will occur on or before the twentieth (20th) business day following delivery of the notice of acceptance. At such closing, the Purchaser will deliver the consideration payable to the order of the Selling Stockholder, against delivery by the Selling Stockholder of the Capital Stock being so purchased, free and clear of all liens, claims, and encumbrances, other than this Agreement, endorsed in good form for transfer to the Purchaser or its designees. If a Purchaser does not accept such offer within the fifteen (15) day period specified above, the offer to such Purchaser will be deemed to have been rejected, and the Selling Stockholder, subject to Section 6.02(d), will be free to sell or transfer such Capital Stock not purchased by the Purchasers to the Buyer on the same terms set forth in the Notice of Sale within ninety (90) days of the expiration of such fifteen (15) day period. If the sale to the Buyer is not so consummated, the terms of this Article VI will again be applicable to any sale or transfer of Capital Stock by the Selling Stockholder. (d) Each Purchaser may elect to sell or transfer in the contemplated transaction up to the total of the number of shares of Capital Stock then held by it (including the Issuable Warrant Shares). Promptly after the receipt of an Election Notice exercising such right, the Selling Stockholder will use its best efforts to cause the Buyer to amend its offer so as to provide for the Buyer's purchase, upon the same terms and conditions as those contained in the Notice of Sale, of all of the shares of Capital Stock (including the Issuable Warrant Shares) elected to be sold (the "Co-Sell Shares") in such Election Notices. In the event that the Buyer is unwilling to amend its offer to purchase all of the Co-Sell Shares in addition to the shares of Capital Stock -13- described in the related Notice of Sale, if the Selling Stockholder desires to proceed with the sale, the total number of shares that such Buyer is willing to purchase will be allocated to the Selling Stockholder and each Purchaser having given an Election Notice exercising its right pursuant to this Section 6.02(d) (the "Co-Sellers") in proportion to the aggregate number of shares of Capital Stock (including Issuable Warrant Shares) held by each such Person; provided, however, that no such Person will be so allocated a number of shares greater than the number of shares that it has sought to sell to such Buyer in the related Notice of Sale or Election Notice. All Capital Stock sold or transferred by the Selling Stockholder and the Co-Sellers with respect to a single Notice of Sale under Section 6.02(b) will be sold or transferred to the Buyer in a single closing on the terms described in such Notice of Sale, and each such share will receive the same per share consideration. In the event that the Buyer for whatever reason, declines to purchase any shares from any Purchaser delivering an Election Notice, then (x) the Selling Stockholder will not be permitted to sell or transfer any shares of Capital Stock to such Buyer and (y) the shares of Capital Stock of the Selling Stockholder that were to have been sold or transferred to the Buyer will be subject to the Purchasers' right of first refusal pursuant to Section 6.02(c) for a period of fifteen (15) days thereafter on the terms and conditions that the Buyer would have purchased such shares of Capital Stock from the Selling Stockholder had it not declined to purchase shares from the Co-Seller under this Section 6.02(d). 6.03 Sales to Related Parties. No sale or transfer of shares of Capital Stock by the Stockholder to a Related Party will be subject to the provisions of Section 6.02; provided. however that such Related Party first agrees to assume the obligations of the Initial Stockholder or Subsequent Stockholder (without relieving the Initial Stockholder or Subsequent Stockholder of any obligations under this Agreement) under this Agreement with respect to the shares of Capital Stock thereby acquired by it and to be bound by the same terms and conditions that apply to the Initial Stockholder or Subsequent Stockholder under this Agreement in a written joinder agreement in a form and substance satisfactory to the Purchasers. ARTICLE VII LIQUIDITY 7.01 Required Registration. At any time after the earlier of May 1, 2002, and six (6) months after the effective date of the initial public offering of the Company's Capital Stock, each Purchaser may, upon not more than two (2) occasions, for each such Purchaser, make a written request to the Company requesting that the Company effect the registration of a certain number of Registrable Securities pro rata for the accounts of the Purchasers based upon the number of Registrable Securities held by them. After receipt of any such a request, the Company will, as soon as practicable, notify all Purchasers of such request and use its best efforts to effect the registration of all Registrable Securities that the Company has been so requested to register for sale, all to the extent required to permit the disposition (in accordance with the intended method or methods thereof) of the Registrable Securities so registered. In no event, other than under Section 7.13, will any Person other than a Purchaser and Persons having registration rights under the Loan Warrant Agreement be entitled to include any shares of Capital Stock in any registration statement filed pursuant to this Section 7.01. If the managing underwriter or underwriters, if any, of the offering of the Registrable Securities for which registration has been demanded advises the -14- Purchasers that the success of the offering would be materially and adversely affected by the inclusion of all the Registrable Securities for which registration has been demanded, then the amount of securities to be registered for the accounts of the Purchasers shall be reduced pro rata based upon the Registrable Securities held by the Purchasers. 7.02 Incidental Registration. If the Company at any time proposes to file on its behalf or on behalf of any of its security holders a registration statement under the Securities Act on any form (other than a registration statement on Form S-4 or S-8 or any successor form unless such forms are being used in lieu of or as the functional equivalent of, registration rights) for any class that is the same or similar to Registrable Securities, it will give written notice setting forth the terms of the proposed offering and such other information as the Purchasers may reasonably request to all holders of Registrable Securities at least thirty (30) days before the initial filing with the Commission of such registration statement, and offer to include in such filing such Registrable Securities as any Purchaser may request. Each Purchaser desiring to have Registrable Securities registered under this Section 7.02 will advise the Company in writing within thirty (30) days after the date of receipt of such notice from the Company, setting forth the amount of such Registrable Securities for which registration is requested. The Company will thereupon include in such filing the number of Registrable Securities for which registration is so requested, and will use its best efforts to effect registration under the Securities Act of such Registrable Securities. Notwithstanding the foregoing, if the managing underwriter or underwriters, if any, of such offering deliver a written opinion to each Purchaser that the success of the offering would be materially and adversely affected by the inclusion of the Registrable Securities requested to be included, then the amount of securities to be offered for the accounts of Purchasers will be reduced first by reducing securities being offered for the account of Persons other than the Purchasers, Persons having registration rights under the Loan Warrant Agreement and the Company, and second by reducing the Registrable Securities being offered pro rata (according to the Registrable Securities held by each Purchaser and securities being registered by Persons having registration rights under the Loan Warrant Agreement) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters. 7.03 Form S-3 Registrations. In addition to the registration rights provided in Sections 7.01 and 7.02 above, if at any time the Company is eligible to use Form S-3 (or any successor form) for registration of secondary sales of Registrable Securities, any Purchaser may request in writing that the Company register shares of Registrable Securities on such form. Upon receipt of such request, the Company will promptly notify all Purchasers in writing of the receipt of such request and each such Purchaser may elect (by written notice sent to the Company within thirty (30) days of receipt of the Company's notice) to have its Registrable Securities included in such registration pursuant to this Section 7.03. Thereupon, the Company will, as soon as practicable, use its best efforts to effect the registration on Form S-3 of all Registrable Securities that the Company has so been requested to register by such Purchaser for sale. The Company will use its best efforts to qualify and maintain its qualification for eligibility to use Form S-3 for such purposes. Notwithstanding this Section 7.03, the Company shall not be obligated to effect any such registration if (a) the Purchasers, together with the holders of any other securities of the Company entitled to inclusion in -15- such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $250,000, or (b) the Company already shall have made two registrations on Form S-3 within the 12-month period immediately preceding the request. Notwithstanding the foregoing, nothing herein shall restrict, prohibit, or limit in any way a Purchaser's ability to exercise its registration rights under Sections 7.01 or 7.02 hereof. 7.04 Rule 144 Availability. Notwithstanding the foregoing, the Company will not be obligated to register the Registrable Securities of any particular Purchaser as to which counsel acceptable to such Purchaser renders an opinion in form and substance satisfactory to the Purchaser to the effect that such Purchaser's Registrable Securities are freely saleable without limitation as to volume, manner of sale, or otherwise within a single three-month period under Rule 144 under the Securities Act. 7.05 Registration Procedures. In connection with any registration of Registrable Securities under this Article VII, the Company will, as soon as practicable: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective until the earlier of such time as all Registrable Securities subject to such registration statement have been disposed of or the expiration of one hundred eighty (180) days; (b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the Securities Act with respect to the sale or other disposition of all Registrable Securities covered by such registration statement until the earlier of such time as all of such Registrable Securities have been disposed of or the expiration of one hundred eighty (180) days (except with respect to registrations effected on Form S-3 or any successor form, as to which no such period shall apply); (c) furnish to each Purchaser such number of copies of the registration statement and prospectus (including, without limitation, a preliminary prospectus) in conformity with the requirements of the Securities Act (in each case including all exhibits) and each amendment or supplement thereto, together with such other documents as any Purchaser may reasonably request; (d) use its best efforts to register or qualify the Registrable Securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions within the United States and Puerto Rico as each Purchaser reasonably requests, and do such other acts and things as may be reasonably required of it to enable such Purchaser to consummate the disposition in such jurisdiction of the securities covered by such registration statement; (e) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its securities holders, as soon as practicable, an earnings statement covering the period of at least twelve months beginning with the first month after the effective date of such registration statement, which earnings statement will satisfy the provisions of Section 11(a) of the Securities Act; -16- (f) provide and cause to be maintained a transfer agent and registrar for Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement; (g) if requested by the underwriters for any underwritten offering of Registrable Securities on behalf of a Purchaser pursuant to a registration requested under Section 7.01, the Company will enter into an underwriting agreement with such underwriters for such offering, such agreement to contain such representations and warranties by the Company and such other terms and provisions as are customarily contained in underwriting agreements with respect to secondary distributions, including, without limitation, provisions with respect to indemnities and contribution as are reasonably satisfactory to such underwriters and the Purchasers; the Purchasers on whose behalf Registrable Securities are to be distributed by such underwriters will be parties to any such underwriting agreement and the representations and warranties by, and the other agreements on the part of, the Company to and for the benefit of such underwriters, will also be made to and for the benefit of such Purchaser; and no Purchaser will be required by the Company to make any representations or warranties to or agreements with the Company or the underwriters other than reasonable and customary representations, warranties, or agreements regarding such Purchaser, such Purchaser's Registrable Securities, such Purchaser's intended method or methods of disposition, and any other representation required by law; (h) furnish, at the written request of any Purchaser, on the date that such Registrable Securities are delivered to the underwriters for sale pursuant to such registration, or, if such Registrable Securities are not being sold through underwriters, on the date that the registration statement with respect to such Registrable Securities becomes effective, (i) an opinion in form and substance reasonably satisfactory to such Purchasers, and addressing matters customarily addressed in underwritten public offerings, of the counsel representing the Company for the purposes of such registration (who will not be an employee of the Company and who will be satisfactory to such Purchasers), addressed to the underwriters, if any, and to the selling holders; and (ii) a letter (the "comfort letter") in form and substance reasonably satisfactory to such Purchasers, from the independent public accountants of the Company, addressed to the underwriters, if any, and to the selling Purchasers making such request (and, if such accountants refuse to deliver the comfort letter to such Purchasers, then the comfort letter will be addressed to the Company and accompanied by a letter from such accountants addressed to such Purchasers stating that they may rely on the comfort letter addressed to the Company); and (i) during the period when the registration statement is required to be effective, notify each selling Purchaser of the happening of any event as a result of which the prospectus included in the registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. It will be a condition precedent to the obligation of the Company to take any action pursuant to this Article VII in respect of the Registrable -17- Securities that are to be registered at the request of any Purchaser that such Purchaser furnish to the Company such information regarding the Registrable Securities held by such Purchaser and the intended method of disposition thereof as is legally required in connection with the action taken by the Company. The managing underwriter or underwriters, if any, for any offering of Registrable Securities to be registered pursuant to Section 7.01 or 7.03 will be selected by the holders of a majority of the Registrable Securities being so registered. 7.06 Allocation of Expenses. Except as provided in the following sentence, the Company will bear all expenses arising or incurred in connection with any of the transactions contemplated by this Article VII, including, without limitation, (a) all expenses incident to filing with the National Association of Securities Dealers, Inc.; (b) registration fees; (c) printing expenses; (d) accounting and legal fees and expenses; (e) expenses of any special audits or comfort letters incident to or required by any such registration or qualification; and (f) expenses of complying with the securities or blue sky laws of any jurisdictions in connection with such registration or qualification. Each Purchaser will severally bear the expense of its underwriting fees, discounts, or commissions relating to its sale of Registrable Securities. 7.07 Listing on Securities Exchange. If the Company lists any shares of Capital Stock on any securities exchange or on the National Association of Securities Dealers, Inc. Automated Quotation System or similar system, it will, at its expense, list thereon, maintain and, when necessary, increase such listing of, all Registrable Securities. 7.08 Holdback Agreements. (a) If any registration pursuant to Section 7.02 is in connection with an underwritten public offering, each Purchaser agrees, if so required by the managing underwriter, not to effect any public sale or distribution of Registrable Securities (other than as part of such underwritten public offering) during the period beginning seven (7) days prior to the effective date of such registration statement and ending on the one hundred eightieth (180th) day after the effective date of such registration statement; provided, that each Stockholder and each Person that is an officer, director, or beneficial owner of five percent (5 %) or more of the outstanding shares of any class of Capital Stock enters into such an agreement. (b) The Company and the Stockholders agree (i) not to effect any public sale or distribution during the period seven (7) days (or such longer period as may be prescribed by Rule 10b-6 under the Exchange Act) prior to the effective date of the registration statement employed in any underwritten public offering and ending on the one hundred eightieth (180th) day after any such registration statement contemplated by Sections 7.01 or 7.03 has become effective, except as part of such underwritten public offering pursuant to such registration statement, and (ii) use their best efforts to cause each holder of its equity securities or any securities convertible into or exchangeable or exercisable for any of such securities, in each case purchased from the Company at any time after the date of this Agreement (other than in a public offering), to agree not to effect any such public sale or distribution of such securities during such period. 7.09 Rule 144. At all times, the Company will take such action as any Purchaser or Initial Stockholder may reasonably request, all to the extent required from time to time to enable such Purchaser or Initial Stockholder to -18- sell shares of Registrable Securities or other common stock without registration pursuant to and in accordance with (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation adopted by the Commission. Upon the request of any Purchaser or Initial Stockholder, the Company will deliver to such Purchaser or Initial Stockholder a written statement as to whether it has complied with such requirements. 7.10 Rule 144A. The Company agrees that, upon the request of any Purchaser or any prospective purchaser of a Warrant, Warrant Shares, Preferred Shares or Conversion Shares designated by a Purchaser, the Company will promptly provide (but in any case within fifteen (15) days of a request) to such Purchaser or potential purchaser, the following information: (a) a brief statement of the nature of the business of the Company and any Subsidiaries and the products and services they offer; (b) the most recent consolidated balance sheets and profit and losses and retained earnings statements, and similar financial statements of the Company for such part of the two preceding fiscal years prior to such request as the Company has been in operation (such financial information will be audited, to the extent reasonably available); and (c) such other information about the Company, any Subsidiaries, and their business, financial condition, and results of operations as the requesting Purchaser or purchaser of such Warrants, Warrant Shares, Preferred Shares or Conversion Shares requests in order to comply with Rule 144A, as amended, and the antifraud provisions of the federal and state securities laws. The Company hereby represents and warrants to any such requesting Purchaser and any prospective purchaser of Warrants, Warrant Shares, Preferred Shares or Conversion Shares from such holder that the information provided by the Company pursuant to this Section 7.10 will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. 7.11 Limitations on Subsequent Registration Rights. Except for the registration rights under the Loan Warrant Agreement, from and after the date of this Agreement, the Company will not, without the prior written consent of the Purchasers, enter into any agreement with any holder or prospective holder of any securities of the Company that would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 7.01, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of its securities will not reduce the amount of the Registrable Securities of the Holders that is included or (b) to make a demand registration that could result in such registration statement being declared effective prior to the effectiveness of the first registration statement effected under Section 7.01 or within one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 7.01. 7.12 Exchange Rights. At the option of any Purchaser, any such Purchaser may exchange its Warrant or Warrant Shares for fully paid and nonassessable shares (calculated as to each exchange to the nearest one-thousandth (1/1000) of a share and rounded upward) of common stock of any Affiliate or Subsidiary of the Company that on the date of receipt of the -19- Exchange Notice has a class of capital stock registered under section 12 of the Exchange Act or within one year and 120 days will have a class of capital stock so registered (such Affiliate or Subsidiary will be referred to in this Agreement as the "Exchange Company" and the common stock of such Affiliate or Subsidiary will be referred to in this Agreement as "Exchange Common Stock"). Each $1,000 worth of Warrants or Warrant Shares (valued at Fair Market Value on the date the Exchange Notice was sent), will be exchangeable for $1,000 worth of Exchange Common Stock (valued at Fair Market Value on the date that the Exchange Notice was sent). To exchange Warrants or Warrant Shares into Exchange Common Stock, the Purchaser will surrender at the principal office of the Exchange Company the Warrants or certificate or certificates evidencing the Warrant Shares duly endorsed or assigned to the Company, and give written notice to the Company at such office that it elects to exchange such Warrants or Warrant Shares (the "Exchange Notice"). Warrants or Warrant Shares will be deemed to have been exchanged immediately prior to the close of business on the day of the surrender for exchange in accordance with the foregoing provisions, and the Person or Persons entitled to receive the Exchange Common Stock issuable upon any such exchange will thereupon be treated for all purposes as the record holder or holders of the Exchange Common Stock. As promptly as practicable on or after the exchange date, the Exchange Company will issue and deliver a certificate or certificates for the number of full shares of Exchange Common Stock issuable upon exchange to the Person or Persons entitled to receive such shares. Upon exchange of any Issued Warrant Shares, the Company will pay or make with respect to Issued Warrant Shares any dividends or other distributions that have been declared on the Warrant Shares in kind or cash, as the case may be. If any Purchaser exchanges its Warrants or Warrant Shares for shares of Exchange Common Stock pursuant to this Section 7.12, such Purchaser will have all of the rights set forth in this Article VII, except that for the purposes of this Article VII the term "Company" will refer instead to the Exchange Company and the term "Registrable Securities" will refer to the shares of Exchange Common Stock held by such Purchaser. 7.13 Inclusion of Stock Held by Initial Stockholders and Subsequent Stockholders. In connection with any registration effected pursuant to this Article VII, the Initial Stockholders and Subsequent Stockholders shall be entitled to include in such registration (on the same terms and conditions as Purchasers selling their Registrable Securities in such registration) shares of Common Stock held by such Initial Stockholders and Subsequent Stockholders; provided that any limitation by the underwriter on the number of shares to be underwritten in connection with such registration shall first be applied to the shares so included by such Subsequent Stockholders, and, if a further limitation is required, then to the shares so included by the Initial Stockholders, and provided further that each such right to include shares of Common Stock in a registration pursuant to this Section 7.13 is contingent upon the execution of an agreement to be bound by all other applicable restrictions contained in this Article VII. As among the Initial Stockholders, no Initial Stockholder shall have the opportunity to include in such registration more shares of Common Stock than are included by any other Initial Stockholder. In connection with the foregoing rights, the Initial Stockholders and Subsequent Stockholders shall receive all notices provided for in Section 7.02 and 7.09 hereof in accordance with the time periods set forth therein. -20- ARTICLE VIII DIRECTORS; VOTING AGREEMENTS 8.01 Voting Agreement. To ensure compliance with this Article VIII, each of the Stockholders hereby irrevocably covenant and agree to vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by each of them, all in accordance with the terms of this Article VIII. A counterpart of this Agreement will be deposited with the Company at its principal place of business or registered office and will be subject to the same right of examination by a stockholder of the Company, in person or by agent or attorney, as are the books and records of the Company. 8.02 Board of Directors. (a) So long as the provisions of this Article VIII remain in effect, each (now or hereafter) party to this Agreement other than the Purchasers will, at the request of FF-ITP or its designee, vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times an individual designated by FF-ITP or its designee will be a director of the Company; provided however, that FF-ITP will not have any obligation to designate or cause any individual to serve on the board of directors of the Company. No director designated by FF-ITP or its designee may be removed without the prior written consent of FF-ITP. (b) So long as the provisions of this Article VIII remain in effect, each (now or hereafter) party to this Agreement other than Klein and the Purchasers will, at the request of Klein, vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times an individual designated by Klein will be a director of the Company; provided, however, that Klein will not have any obligation to designate or cause any individual to serve on the board of directors of the Company. No director designated by Klein may be removed without Klein's prior written consent. (c) So long as the provisions of this Article VIII remain in effect, each (now or hereafter) party to this Agreement other than Blech and the Purchasers will, at the request of Blech, vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times an individual designated by Blech will be a director of the Company; provided, however, that Blech will not have any obligation to designate or cause any individual to serve on the board of directors of the Company. No director designated by Blech may be removed without Blech's prior written consent. (d) So long as the provisions of this Article VIII remain in effect, each (now or hereafter) party to this Agreement other than Kandl and the Purchasers will, at the request of Kandl, vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times Kandl will be a director of the Company; provided, however, that Kandl will not have any obligation to designate or cause himself to serve on the board of directors of the Company. Kandl may not be removed as a director without his prior written consent. (e) So long as the provisions of this Article VIII remain in effect, each (now or hereafter) party to this Agreement other than Nice and the Purchasers will, at the request of Nice, vote, or give or withhold consent -21- with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times Nice will be a director of the Company; provided, however, that Nice will not have any obligation to designate or cause himself to serve on the board of directors of the Company. Nice may not be removed as a director without his prior written consent. (f) FF-ITP, Klein, Blech, Kandl, or Nice may, at any time, terminate its right to designate a director under this Section 8.02 by providing written notice of such termination to the Company. (g) Notwithstanding anything to the contrary in this Section 8.02, so long as the provisions of this Article VIII remain in effect, in the event of any default by the Company in its covenants and obligations specified in Sections 4.01, 4.05 and 4.06 of the Purchase Agreement, and the failure of the Company to cure such default within thirty (30) days after written notice of such default, FF-ITP shall have the right to call a special meeting of stockholders of the Company, to increase the number of directors authorized by the Company's certificate of incorporation and/or bylaws, and to designate such number of nominees to serve as directors of the Company as is equal to a majority of the total number of directors authorized in the Company's certificate of incorporation and bylaws (but only by filling vacancies and not by removing incumbent directors from the Board); each party to this Agreement other than the Purchasers will vote the shares of the Company's Capital Stock now owned or later acquired by such party to cause the increase in the authorized number of directors as designated by FF-ITP and the election of such designees of FF-ITP until the date two (2) years after the date of such special meeting of stockholders. At any time that FF-ITP has nominated a majority of the directors pursuant to this Section 8.02(g), the Company shall use its reasonable efforts to assure that each individual named in Sections 8.02(a)-(e) continues to be elected to the Board, and FF-ITP shall not take, nor will it allow its Board designees to take, any action to impair any party's right to continue to be elected to the Board under Sections 8.02(a)- (e). To ensure the prompt enforcement of the rights of FF-ITP under this paragraph, each party to this Agreement other than the Purchasers hereby grants FF-ITP an irrevocable proxy to vote such party's shares in the manner and under the circumstances permitted by this paragraph. The parties to this Agreement (other than the Purchasers) agree that this grant of a proxy is coupled with an interest and is irrevocable. 8.03 Voting Agreement Relating to Board of Directors Matters. (a) So long as the provisions of this Article VIII remain in effect, each (now and hereafter) party to this Agreement other than the Purchasers will vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times the director designated by Klein will be elected to the Executive Committee of the Board of Directors of the Company, which shall consist of five directors, two of whom shall be employees or former employees of the Company's operating divisions or Subsidiaries. (b) So long as the provisions of this Article VIII remain in effect, each (now and hereafter) party to this Agreement other than the Purchasers will vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times the director designated by Blech will be elected to the Executive Committee of the Board of Directors of the Company, which shall consist of five directors, two of whom shall be employees or former employees of the Company's operating divisions or Subsidiaries. -22- (c) So long as the provisions of this Article VIII remain in effect, each (now and hereafter) party to this Agreement other than the Purchasers will vote, or give or withhold consent with respect to, all shares of Capital Stock now owned or later acquired by such party so that at all times the director designated by FF-ITP or its designee will be elected to the Executive Committee of the Board of Directors of the Company, which shall consist of five directors, two of whom shall be employees or former employees of the Company's operating divisions or Subsidiaries. (d) Notwithstanding the establishment of an executive committee, the following decisions shall, at a minimum, always require approval of the board (and not a committee thereof): (1) a consolidation of the Company with one or more corporations having capital stock to form a new consolidation corporation; (2) a merger of the Company into another corporation having capital stock or a business trust having transferable units of beneficial interest or a limited partnership or a limited liability company; (3) a merger of one or more corporations having capital stock into the Company or a merger of one or more business trusts having transferable units of beneficial interest into the Company or a merger of one or more limited partnerships into the Company or a merger of one or more limited liability companies into the Companies; (4) an exchange or issuance of stock in connection with an acquisition transaction by the Company in which the aggregate consideration (including the Fair Market Value of the shares exchanged) exceeds $30 million; (5) a transfer of all or substantially all of the assets of the Company; (6) an attempt by the Company to redeem or buy back any of the Company's Capital Stock; (7) the issuance by the Company of Capital Stock for a consideration which is unreasonably disproportionate to its fair market value per share, or less than $5.00 per share, except for Permitted Stock; (8) the actual or constructive liquidation of the Company; (9) the dissolution of the Company; (10) amendments to the certificate of incorporation or the bylaws of the Company; (11) a transaction between the Company and any of its affiliates or subsidiaries or between the Company and any person who is currently serving on the Board of Directors of the Company or is currently serving as an officer or employee of the Company or any of its affiliates or subsidiaries. During any period in which the provisions of Section 8.02(g) have been implemented, the Company shall not have an executive committee of the Board of Directors. 8.04 Termination. All rights under this Article VIII shall terminate in their entirety on the closing of the Company's initial public offering of shares of Common Stock pursuant to an effective registration statement under the Securities Act of 1933, as amended, involving net proceeds to the Company of at least $30,000,000, after deducting applicable underwriters' commissions and discounts. 8.05 No Revocation. The voting agreements contained herein are coupled with an interest and may not be revoked, except by written consent of all of the Stockholders. 8.06 Restrictive Legend. All certificates representing shares of Capital Stock owned or hereafter acquired by the Stockholders or any transferee of them shall have affixed thereto a legend substantially in the following form: "THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VOTING AGREEMENTS AS SET FORTH IN A STOCKHOLDERS' AGREEMENT BY AND AMONG THE REGISTERED OWNER OF THIS CERTIFICATE, THE COMPANY AND CERTAIN OTHER STOCKHOLDERS OF THE COMPANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE SECRETARY OF THE COMPANY." -23- 8.07 Applicability of Article VIII to Regulated Holders. Anything herein to the contrary notwithstanding, no provision of this Article VIII, other than the provisions of Section 8.06, shall be enforceable by any Regulated Holder or any Affiliate of any Regulated Holder. ARTICLE IX MISCELLANEOUS 9.01 Default. It is agreed that a violation by any party of the terms of this Agreement cannot be adequately measured or compensated in money damages, and that any breach or threatened breach of this Agreement by a party to this Agreement would do irreparable injury to the nonbreaching party. It is, therefore, agreed that in the event of any breach or threatened breach by a party to this Agreement of the terms and conditions set forth in this Agreement, the nondefaulting party will be entitled, in addition to any and all other rights and remedies that it may have in law or in equity, to apply for and obtain injunctive relief requiring the defaulting party to be restrained from any such breach, or threatened breach or to refrain from a continuation of any actual breach. 9.02 Integration. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof supersedes all previous written, and all previous or contemporaneous oral negotiations, understandings, arrangements, and agreements. This Agreement may not be amended or supplemented except by a writing signed by the Company and the Stockholders in accordance with Section 9.15. 9.03 Headings. The headings in this Agreement are for convenience and reference only and are not part of the substance of this Agreement. References in this Agreement to Sections and Certificate are references to the Sections and Certificate of this Agreement unless otherwise specified. 9.04 Severability. The parties to this Agreement expressly agree that it is not their intention to violate any public policy, statutory or common law rules, regulations, or decisions of any governmental or regulatory body. If any provision of this Agreement is judicially or administratively interpreted or construed as being in violation of any such policy, rule, regulation, or decision, the provision, section, sentence, word, clause, or combination thereof causing such violation will be inoperative (and in lieu thereof there will be inserted such provision, sentence, word, clause, or combination thereof as may be valid and consistent with the intent of the parties under this Agreement) and the remainder of this Agreement, as amended, will remain binding upon the parties to this Agreement, unless the inoperative provision would cause enforcement of the remainder of this Agreement to be inequitable under the circumstances. 9.05 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication be given to or served upon any of the parties by another, such notice, demand, request, consent, approval, declaration, or other communication will be in writing and will be deemed to have been validly served, given, or delivered (and "the date of such notice" or words of similar effect will mean the date) five (5) days after deposit in the United States mails, certified mail, return receipt requested, with proper postage prepaid, or upon receipt thereof with written acknowledgment of receipt (whether by non-certified mail, telecopy, telegram, express or hand delivery, or otherwise), whichever is earlier, and addressed to the party to be notified as follows: -24- If to Creditanstalt, at: Address of Creditanstalt beneath the name of Creditanstalt on the signature pages of this Agreement with courtesy copies to: Troutman Sanders LLP 600 Peachtree Street, N. E. Suite 5200 Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster, Esquire Fax (404) 885-3900 If to the Company, at: IT Partners, Inc. 9881 Broken Land Parkway Suite 102 Columbia, MD 21046 Attn: Daniel F. Klein, Chairman of the Board Fax: (401) 309-9801 with courtesy copies to: Swidler & Berlin, Chartered 300 K Street Washington, D.C. 20007 Attn: Kenneth I. Schaner, Esquire Andrew M. Ray, Esquire Fax: (202) 424-7643 If to FF-ITP, at: FF-ITP, L.P. 702 Oberlin Road Suite 150 Raleigh, North Carolina 27605 Attn: James D. Lumsden Fax: (919) 743-2501 with courtesy copies to: Wyrick, Robbins, Yates & Ponton, L.L.P. 4101 Lake Boone Trail, Suite 300 Raleigh, North Carolina 27607-7506 Attn: James M. Yates, Jr., Esquire Fax: (919)781-4865 If to Indosuez, at: Indosuez IT Partners 1211 6th Avenue 7th Floor New York, New York 10036 Attn: Michael Arougheti Fax: (212) 278-2254 -25- If to Wachovia, at Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA423 Atlanta, Georgia 30303 Attn: Senior Vice President/ITP Fax: (404) 332-1455 with courtesy copies to: Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA715 Atlanta, Georgia 30303 Attn: Legal Department/WCA/ITP Fax: (404) 332-1455 If to an Initial or Subsequent Stockholder, at: Address of such stockholder beneath the name of such stockholder on the signature pages of this Agreement or to such other address as each party may designate for itself by like notice. Notice to any holder of Registrable Securities will be delivered as set forth above to the address shown on the stock transfer books of the Company or the Warrant Register unless such holder has advised the Company in writing of a different address to which notices are to be sent under this Agreement. Failure or delay in delivering the courtesy copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies of the actual notice will in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication. No notice, demand, request, consent, approval, declaration, or other communication will be deemed to have been given or received unless and until it sets forth all items of information required to be set forth therein pursuant to the terms of this Agreement. 9.06 Successors. This Agreement will be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns; provided, however, that no sale, assignment or other transfer by any party to this Agreement of any of its Capital Stock or rights hereunder to another Person will be valid and effective unless and until the transferee or assignee first executes a joinder agreement a form and substance reasonably satisfactory to the Company agreeing to be bound by the terms and conditions of this Agreement. Notwithstanding the foregoing, no party to this Agreement except the shall have the ability to assign its rights under Article II, Article III, Article IV, Article V and Article VI hereof. 9.07 Remedies. The failure of any party to enforce any right or remedy under this agreement, or to enforce any such right or remedy promptly, will not constitute a waiver thereof, nor give rise to any estoppel against such party, nor excuse any other party from its obligations under this Agreement. Any waiver of any such right or remedy by any party must be in writing and signed by the party against which such waiver is sought to be enforced. 9.08 Fees. Any and all fees, costs, and expenses, of whatever kind and nature, including attorneys' fees and expenses, incurred by the Purchasers in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement will, to the extent -26- provided in this Agreement, be borne and paid by the Company within ten (10) days of demand by the Purchasers. 9.09 Counterparts. This Agreement may be executed in any number of counterparts, which will individually and collectively constitute one agreement. 9.10 Other Business. It is understood and accepted that Purchaser and its Affiliates have interests in other business ventures that may be in conflict with the activities of the Company and that nothing in this Agreement will limit the current or future business activities of such parties whether or not such activities are competitive with those of the Company. 9.11 Choice of Law. THIS AGREEMENT WILL BE DEEMED TO HAVE BEEN MADE IN DELAWARE, AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 9.12 Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner of such Registrable Securities, the beneficial owner of Registrable Securities may, at its election, be treated as the holder of such Registrable Securities for purposes of any request or other action by any Purchaser or holder of Registrable Securities pursuant to this Agreement or any determination of any number or percentage of shares of Registrable Securities held by any Purchaser or holder of Registrable Securities contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner's beneficial ownership of such Registrable Securities. In no event will a Purchaser be required to exercise its Warrant as a condition to the registration of such Warrant or Registrable Securities thereunder. 9.13 Fiduciary Duties. The Company acknowledges and agrees that, for so long as any Warrant is outstanding and regardless of whether the holder has exercised any portion of its Warrant, (a) the officers and directors of the Company will owe the same duties (fiduciary and otherwise) to the holder as are owed to a stockholder of the Company and (b) the holder will be entitled to all rights and remedies with respect to such duties or that are otherwise available to a stockholder of the Company under the Delaware General Corporation Law, as amended from time to time. 9.14 Duties Among Purchasers. Each Purchaser agrees that no other Purchaser will by virtue of this Agreement be under any fiduciary or other duty to give or withhold any consent or approval under this Agreement or to take any other action or omit to take any action under this Agreement, and that each other Purchaser may act or refrain from acting under this Agreement as such other Purchaser may, in its discretion, elect. 9.15 Amendment. This Agreement shall not be modified or amended, nor shall the operation of any provision hereof be waived, except (a) by a writing signed by the party against whom enforcement is sought, or (b) by a writing signed by the Stockholders holding at least a majority of the Capital Stock (on a fully diluted basis), including each Purchaser, which modification or amendment shall be binding upon and is hereby consented to by all Stockholders; provided, however, that the Corporation may add new holders of -27- its shares as parties to this Agreement as provided herein, which additions are hereby consented to by all Stockholders; and provided further that none of Sections 7.09, 7.13 or Article VIII shall be modified, amended or waived except by a writing signed by all parties to this Agreement or by the party against whom enforcement is sought. 9.16 Confidentiality. Each Purchaser agrees to keep confidential any information delivered by the Company to such Purchaser under this Agreement that the Company clearly indicates in writing to be confidential information; provided, however, that nothing in this Section 9.16 will prevent such Purchaser from disclosing such information (a) to any Affiliate of such Purchaser or any actual or potential purchaser, participant, assignee, or transferee of such Purchaser's rights or obligations hereunder that agrees to be bound by the terms of this Section 9.16, (b) upon order of any court or administrative agency, (c) upon the request or demand of any regulatory agency or authority having jurisdiction over such Purchaser, (d) that is in the public domain, (e) that has been obtained from any Person that is not a party to this Agreement or an Affiliate of any such party without breach by such Person of a confidentiality obligation known to such Purchaser, (f) in connection with the exercise of any remedy under this Agreement, or (g) to the certified public accountants for such Purchaser. The Company agrees that such Purchaser will be presumed to have met its obligations under this Section 9.16 to the extent that it exercises the same degree of care with respect to information provided by the Company as it exercises with respect to its own information of similar character. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -28- IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. COMPANY: IT PARTNERS, INC. BY: ---------------------------------------- NAME:____________________________________ TITLE: 9881 Broken Land Parkway Suite 102 Columbia, MD 21046 Attn: Daniel F. Klein, Chief Executive Officer Fax: (401) 309-9801 CREDITANSTALT: CREDITANSTALT CORPORATE FINANCE, INC. BY: ---------------------------------------- Robert M. Biringer Executive Vice President BY: ---------------------------------------- Carl Drake Two Greenwich Plaza 4th Floor Greenwich, Connecticut 06830 Attn: Lisa Bruno Fax: (203) 861-6594 with copies to: Two Ravinia Drive Suite 1680 Atlanta, Georgia 30346 Attn: Carl Drake Fax: (770) 390-1851 -29- FF-ITP: FF-ITP, L.P. BY: Franklin Street/Fairview Capital, L.L.C., its general partner BY: Franklin Capital, L.L.C., its manager BY: ______________________________ -------------------------------------- James D. Lumsden, Manager 702 Oberlin Road Suite 150 Raleigh, North Carolina 27605 Attn: James D. Lumsden Fax: (919) 743-2501 INDOSUEZ: INDOSUEZ IT PARTNERS BY: Indosuez CM II, Inc. Managing General Partner BY: ------------------------------------- NAME: TITLE: BY: -------------------------------------- NAME: TITLE: 1211 6th Avenue 7th Floor New York, New York 10036 Attn: Michael Arougheti Fax: (212) 278-2254 WACHOVIA: WACHOVIA CAPITAL ASSOCIATES, INC. BY: --------------------------------- NAME: TITLE: -30- Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA423 Atlanta, Georgia 30303 Attn: Senior Vice President/ITP Fax: (404) 332-1455 with copies to: Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA715 Atlanta, Georgia 30303 Attn: Legal Department/WCA/ITP Fax: (404) 332-1455 -31- INITIAL STOCKHOLDERS: Daniel J. Klein ---------------------------------- Jamie E. Blech ---------------------------------- Martin Kandl ---------------------------------- Haeyoung P. Kandl ---------------------------------- Stanley Nice ---------------------------------- John Clement ---------------------------------- -32- SUBSEQUENT STOCKHOLDERS: Christopher Corbett ---------------------------------- Merrie Corbett ---------------------------------- Thomas Gardner ---------------------------------- Charles Schaeffer ---------------------------------- Mark Yanson ____________________________________________ ---------------------------------- Robert Wentworth ---------------------------------- Jon DeFina -----------------------------------__________ Philip Tomasi _____________________________________________ ----------------------------------- -33- Charles Menzel ------------------------------------ Michael J. Baltosiewich, as Trustee U-A dated 10/20/72 -------------------------------------- John D. Bamberger, as Trustee U-A dated 11/9/95 --------------------------------------- William C. Church ---------------------------------------- William C. Fay ---------------------------------------- Deborah J. Foy ----------------------------------------- William C. Finkenstaedt _____________________________________________ ------------------------------------------ Robert M. Fraser ------------------------------------------ -34- Raymond G. Green ---------------------------------------- Carl J. Griffin -----------------------------------------_____ Sheree Haladik ------------------------------------------ Dirk Kjolhede ------------------------------------------ Grant Morisette ----------------------------------------- William E. Murray ---------------------------------------- Robert M. Roy --------------------------------------- Michael A. Ryan --------------------------------------- -35- Arnold J. Townsend -------------------------------------- Alan E. Wise, as Trustee U-A dated 12/13/95 -------------------------------------- _____________________________________________ -36- Exhibit A
STOCKHOLDER AGREEMENT ISSUED AND OUTSTANDING CAPITAL STOCK as of March 31, 1998 Name of Initial Number of Number of Stockholder Address Shares Options - ---------------- ------- ---------- --------- Daniel J. Klein c/o IT Partners, Inc. 9881 Broken Land Pkwy. Suite 102 10,900 Series A Columbia, MD 21046 550,101 Common None Jamie E. Blech c/o IT Partners, Inc. 9881 Broken Land Pkwy. Suite 102 10,900 Series A Columbia, MD 21046 550,101 Common None Martin and Haeyoung P. Kandl (jointly) 10700 Harper Avenue Silver Spring, MD 20901 365,435 Common None Stanley Nice c/o CNS, Inc. 100 Ford Road Denville, NJ 07834 159,431 Common None John Clement 181 Statesville Quarry Rd. Lafeyette, NJ 07848 151,550 Common None
Name of Subsequent Number of Number of Stockholder Address Shares Options - --------------- -------- --------- -------- Christopher and Merrie Corbett (jointly) c/o A-Com, Inc. 4315 Walney Road Suite 100 Chantilly, VA 20151 Charles Schaeffer c/o Financial System Consulting, Inc. One World Trade Center Long Beach, CA 90831 Garrett Schaeffer c/o Financial System Consulting, Inc. One World Trade Center Long Beach, CA 90831 Mark Yanson c/o IT Partners, Inc. 9881 Broken Land Pkwy. Suite 102 Columbia, MD 21046 Robert Wentworth c/o Incline Corp. 2192 Anchor Ct., Ste. B Newbury Park, CA 91320 Jon DeFina c/o Incline Corp. 2192 Anchor Ct., Ste. B Newbury Park, CA 91320 Philip Tomasi c/o Incline Corp. 2192 Anchor Ct., Ste. B Newbury Park, CA 91320 Charles Menzel c/o Incline Corp. 2192 Anchor Ct., Ste. B Newbury Park, CA 91320 Michael J. Baltosiewich, as Trustee U-A dated 10/20/72 c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 John D. Bamberger, as Trustee U-A dated 11/9/95 c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 William C. Church c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 William C. Fay c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Deborah J. Foy c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 William C. Finkenstaedt c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Robert M. Fraser c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Raymond G. Green c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Carl J. Griffin c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Sheree Haladik c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Dirk Kjolhede c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Grant Morisette c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 William E. Murray c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Robert M. Roy c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Michael A. Ryan c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Arnold J. Townsend c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326 Alan E. Wise, as Trustee U-A dated 12/13/95 c/o Sequoia Diversified Products, Inc. 107 South Squirrel Rd. Auburn Hills, MI 48326
Name of Number of Number of Shares Purchaser Address Shares Subject to Warrants - ----------- ------- ---------- -------------------- Creditanstalt Corporate Finance, Inc. Two Ravinia Drive 412,579 Loan Suite 1680 Warrant Shares Atlanta, GA 30346 Attn: Carl Drake 222,222 Series B 645,587 Issuable Fax: (770) 390-1851 200,000 Series A(1) Warrant Shares(2) FF-ITP, L.P. 702 Oberlin Road Suite 150 515,724 Raleigh, NC 27605 Issuable Attn: James D. Lumsden Warrant Fax: (919) 833-9018 110,000 Series A(1) Shares(2) Indosuez IT Partners 1211 6th Avenue, 7th Floor New York, NY 10036 Attn: Michael Arougheti Fax: (212) 278-2254 431,965 Series B None Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA423 Atlanta, GA 30303 Attn: Sr. Vice Pres./ITP Fax: (404) 332-1455 647,948 Series B None /TABLE EXHIBIT B JOINDER AGREEMENT to Stockholder Agreement of IT PARTNERS, INC. This Joinder Agreement (the "Joinder") is made as of the day of ----- - -------------------- between IT Partners, Inc., a Delaware corporation (the "Company"), and (the "New Stockholder"). ---------------------- WHEREAS, the Company and all its stockholders are parties to a certain Amended and Restated Stockholder Agreement dated March , 1998 (as amended, restated, supplemented, or modified from time to time, the "Agreement"), that governs the orderly disposition of shares of the Company's stock, among other matters; and WHEREAS, the Agreement permits additional holders or transferees of the Company's shares to become parties to the Agreement upon execution of a joinder agreement in form and substance satisfactory to the Company; and WHEREAS, the New Stockholder desires to become a party, and the Company desires that the New Stockholder become a party, to the Agreement; NOW, THEREFORE, in consideration of the premises, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows. 1. The New Stockholder is hereby made a party to the Agreement with respect to the ( ) shares of the Stock of ------------------- ----- ------------ the Company (the "Stock") owned by the New Stockholder and represented by the Company's stock certificate no. , and the New Stockholder hereby consents to --- be bound by all the terms and conditions of the Agreement. 2. [Complete if applicable] The New Stockholder has received the Stock as a successor, assignee or transferee of , which ----------------------- was a Purchaser under the Agreement. 3. The New Stockholder has reviewed this Joinder and the Agreement in their entireties, and has had an opportunity to obtain the advice of counsel prior to executing this Joinder and fully understands all provisions of the Joinder and the Agreement. 4. This Joinder may be executed in any number of counterparts, each of which shall be an original and all of which taken together shall constitute one instrument. IN WITNESS WHEREOF, the parties have duly executed this Joinder under seal as of the day and year first set forth above. "Company" IT PARTNERS, INC. [CORPORATE By:______________________________ SEAL] ----------------------------- Title: "New Stockholder" ------------------------------ (Printed or typed name) -------------------------------(SEAL) (Signature) Address of New Stockholder: EX-4.4 4 SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT THIS SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") is made as of March 31, 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT CORPORATE FINANCE, INC., having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 (together with any successor, assignee or transferee, "Creditanstalt"), FF-ITP, L.P., a Delaware limited partnership ("FF-ITP"), INDOSUEZ IT PARTNERS, having offices at 1211 Avenue of the Americas, New York, New York 10036-8701 (together with any successor, assignee or transferee, "Indosuez"), WACHOVIA CAPITAL ASSOCIATES, INC., having offices at 191 Peachtree Street, N.E., 26th Floor, Atlanta, Georgia 30303 (together with any successor, assignee or transferee, "Wachovia", which, together with Creditanstalt, FF-ITP and Indosuez are individually and collectively, as the context requires, referred to herein as the "Purchaser"), and each of the STOCKHOLDERS named on the signature pages hereto (individually and collectively, as the context requires, the "Stockholder"). W I T N E S S E T H: WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by the First Amendment to Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further amended by the Second Amendment to Preferred Stock and Warrant Purchase Agreement dated October 27, 1997, as further amended by the Third Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, and as further amended by the Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated December 16, 1997 (as amended, the "Original Purchase Agreement") by and among the parties thereto, (i) Creditanstalt purchased an aggregate of 100,000 shares of the Company's Series A Preferred Stock and warrants (the "Equity Warrants") for the purchase of up to 456,907 shares (subject to adjustment as set forth in Section 2.08 of the Original Purchase Agreement) of either the Company's common stock, $.01 par value per share ("Common Stock"), or the Company's Series B Preferred Stock, $.01 par value per share; and (ii) FF-ITP purchased 110,000 shares of the Company's Series A Preferred Stock, 29,516 shares of Common Stock, and Equity Warrants for the purchase of up to 515,724 shares (subject to adjustment as set forth in Section 2.08 of the Original Purchase Agreement) of the Company's Common Stock; and WHEREAS, the Company and the Stockholders amended and restated the Original Purchase Agreement pursuant to that certain Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of January 8, 1998 (the "First Restated Purchase Agreement") pursuant to which Creditanstalt acquired (a) 100,000 shares of Series A Preferred Stock with Equity Warrants for the purchase of 188,680 shares of Common Stock or Series B Preferred Stock, and (b) 222,222 shares of Series B Preferred Stock; and WHEREAS, the Company desires that Indosuez and Wachovia make the following equity investments as of the Second Restatement Closing Date (as defined herein): (1) Indosuez will purchase 431,965 shares of Series B Preferred Stock at an aggregate purchase price of $2,000,000 ($4.63 per share), and (2) Wachovia will purchase 647,948 shares of Series B Preferred Stock at an aggregate purchase price of $3,000,000 ($4.63 per share) ((1) and (2) are collectively referred to as the "Additional Equity Investments"); and WHEREAS, the parties hereto wish to amend and restate the First Restated Purchase Agreement in order to provide for the Additional Equity Investments and make certain other changes set forth herein; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchasers, the Stockholders, and the Company, intending to be legally bound, agree as follows: Article I Definitions As used in this Agreement, the following terms have the meanings indicated. Acquisition Stock. This term shall mean Common Stock of the Company issued subsequent to the Closing Date in consideration for the acquisition of all or substantially all the assets (including the stock or other ownership interests) of Persons that are identified by the Company as acquisition targets, provided that the Fair Market Value of such Common Stock as well as other consideration paid by the Company for such assets is not unreasonably disproportionate to the fair market value of the assets being acquired, as determined by the Company's Board of Directors or its executive committee. Additional Securities. This term is defined in Section 2.08(b)(iv) Adjustment Event. Any event in which (a) the Company issues any shares of Capital Stock in an Adjustment Public Offering for consideration per share that exceeds the amount received per share by any Holder in connection with the exercise of the Call Option with respect to such Holder; (b) any Person acquires Capital Stock in connection with the acquisition of the beneficial ownership of more than fifty percent (50%) of the voting securities of the Company, or acquires Capital Stock and the right to elect a majority of the members of the Company's board of directors for a consideration per share or unit that exceeds the amount received per share by any such Holder in connection with the exercise of such Call Option; (c) the Company sells all or a majority of its assets or revenue or income generating capacity for such amount of consideration that, if the Company were liquidated on the date that such sale is consummated, the holders of any class of Capital Stock would receive per share distributions exceeding the amount received per share by any such Holder in connection with the exercise of such Call Option; or (d) the Company participates in any merger, consolidation, reorganization, share exchange, recapitalization, or similar transaction or series of related transactions involving a change of control of the Company or disposition of all or a majority of its assets or revenue or income generating capacity, directly or indirectly, in which the holders of any class of Capital Stock receive per share consideration for, or distributions with respect to, their shares in an amount that exceeds the amount received per share by such Holder in connection with the exercise of such Call Option. Adjustment Public Offering. Each public offering of shares of any class of Capital Stock pursuant to a registration statement filed with the Commission. Affiliate. With respect to any Person, (a) a Person that, directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with, such Person; (b) any Person of which such Person or such Person's spouse is an officer, director, security holder, partner, or, in the case of a trust, the beneficiary or trustee, and (c) any Person that is an officer, director, security holder, partner, or, in the case of a trust, the beneficiary or trustee of such Person. The term "control" as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract, or otherwise. In addition, as to any Purchaser, "Affiliate" shall include any partnership a majority of the partners of which are officers, directors, employees or Affiliates of such Purchaser, and as to the Company, "Affiliate" shall not include any Purchaser or any Affiliate of any Purchaser. Agreement. This term is defined in the preamble. Appraised Value. The value determined in accordance with the following procedures. For a period of thirty (30) days after the date of a Valuation Event (the "Negotiation Period"), each party to this Agreement agrees to negotiate in good faith to reach agreement upon the Appraised Value of the securities or property at issue, as of the date of the Valuation Event, which will be the fair market value of such securities or property, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. In the event that the parties are unable to agree upon the Appraised Value of such securities or other property by the end of the Negotiation Period, then the Appraised Value of such securities or property will be determined for purposes of this Agreement by an Appraiser. An "Appraiser" shall be a recognized appraisal or investment firm with experience in making determinations of value of the type required to be made under this definition. If the Holders and the Company cannot agree on an Appraiser within thirty (30) days after the end of the Negotiation Period, the Company, on the one hand, and the Holders, on the other hand, shall each select an Appraiser within forty (40) days after the end of the Negotiation Period and those two Appraisers shall select within fifty (50) days after the end of the Negotiation Period an independent Appraiser to determine the fair market value of such securities or property, without premium for control or discount for minority interests. Such independent Appraiser shall be directed to determine fair market value of such securities or property as soon as practicable, but in no event later than thirty (30) days from the date of its selection. The determination by an Appraiser of the fair market value will be conclusive and binding on all parties to this Agreement. Appraised Value of each share of Common Stock at a time when (i) the Company is not a reporting company under the Exchange Act and (ii) the Common Stock is not traded in the organized securities markets, will, in all cases, be calculated by determining the Appraised Value of the entire Company taken as a whole (plus the exercise price of all options, warrants and other rights to acquire Capital Stock of the Company having an exercise price per share less than the Fair Market Value of such Capital Stock) and dividing that value by the sum of (x) the number of shares of Common Stock then outstanding plus (y) the number of shares of Common Stock Equivalents, without premium for control or discount for minority interests, illiquidity, or restrictions on transfer. The costs of the Appraiser or Appraisers will be borne by the Company. In no event will the Appraised Value of the Common Stock or Other Securities be less than the per share consideration received or receivable with respect to the Common Stock or securities or property of the same class as the Other Securities, as the case may be, in connection with a pending transaction involving a sale, merger, recapitalization, reorganization, consolidation, share exchange, dissolution of the Company, sale or transfer of all or a majority of its assets or revenue or income generating capacity, or similar transaction. The prevailing market prices for any security or property will not be dispositive of the Appraised Value thereof. Appraiser. This term is defined in the definition of Appraised Value. Average Market Value. The average of the Closing Prices for the security in question for the thirty (30) trading days immediately preceding the date of determination. Book Value. With respect to shares of Common Stock an amount equal to the quotient determined by dividing (a) the sum of (x) the total consolidated assets of the Company shown on the most recent regularly prepared consolidated balance sheet of the Company prior to the date of the Valuation Event in question minus (y) the total consolidated liabilities of the Company as shown on the most recent regularly prepared consolidated balance sheet of the Company prior to the date of the Valuation Event by (b) the aggregate number of shares of Common Stock and Common Stock Equivalents as of the date of the Valuation Event. For the purposes of this Agreement, the Book Value of the shares of Common Stock will be determined by the independent certified public accountants then retained by the Company as described in Section 4.06. Business Combination Options. This term shall mean options to purchase Common Stock of the Company that (a) are issued to employees of the Company or of Subsidiaries of the Company hired after the Original Closing Date; (b) in the aggregate do not exceed 12% of the Acquisition Stock issued by the Company; and (c) have an exercise price equal to the Fair Market Value on the date such options are granted, giving effect to any such acquisition consummated on such date. Buyer. This term is defined in Section 6.02(a)(ii) of the Stockholder Agreement. Call Option. This term is defined in Section 5.01 of the Stockholder Agreement. Call Option Closing. This term is defined in Section 5.04 of the Stockholder Agreement. Call Option Period. This term is defined in Section 5.01 of the Stockholder Agreement. Capital Stock. As to any Person, its common stock and any other capital stock of such Person authorized from time to time, and any other shares, options, interests, participations, or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock (including the Series A Preferred Stock and Series B Preferred Stock), phantom stock, stock appreciation rights, convertible notes or debentures, stock purchase rights, and all agreements, instruments, documents, and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. Certificate. The Certificate of Incorporation of the Company, as amended. Closing. This term refers to the purchase and sale of the Series B Preferred Stock, effective as of the Second Restatement Closing Date. Closing Price. (a) If the primary market for the security in question is a national securities exchange registered under the Exchange Act, the National Association of Securities Dealers Automated Quotation System -- National Market System, or other market or quotation system in which last sale transactions are reported on a contemporaneous basis, the last reported sales price, regular way, of such security for such day, or, if there has not been a sale on such trading day, the highest closing or last bid quotation therefor on such trading day (excluding, in any case, any price that is not the result of bona fide arm;s length trading); or (b) If the primary market for such security is not an exchange or quotation system in which last sale transactions are contemporaneously reported, the highest closing or last bona fide bid or asked quotation by disinterested Persons in the over-the-counter market on such trading day as reported by the National Association of Securities Dealers through its Automated Quotation System or its successor or such other generally accepted source of publicly reported bid quotations as the Holders designate from time to time. Common Stock. The common stock, $.01 par value, of the Company. Common Stock Equivalent. Any option, warrant, right, or similar security exercisable into, exchangeable for, or convertible to Common Stock. Commission. The Securities and Exchange Commission and any successor federal agency having similar powers. Company. IT Partners, Inc. and any successor or assign, and, unless the context requires otherwise, the term Company includes any Subsidiary. Conversion Shares. Shares of Common Stock issued or issuable upon conversion of the Series B Preferred Stock. Co-Sell Shares. This term is defined in Section 6.02(d) of the Stockholder Agreement. Co-Sellers. This term is defined in Section 6.02(d) of the Stockholder Agreement. Dilution Fee. This term is defined in Article III of the Stockholder Agreement. EBITDA. This term shall mean the Company's earnings before interest, taxes, depreciation and amortization, all as determined in accordance with generally accepted accounting principles, consistently applied. Election Notice. This term is defined in Section 6.02(b) of the Stockholder Agreement. Employment Agreements. This term is defined in Section 4.04(g). Equity of the Company. This term shall mean the total stockholders' equity of the Company, determined in accordance with generally accepted accounting principals. The amount of equity of the Company represented by any Warrant Shares held by Creditanstalt and/or its Affiliates shall be determined by subtracting from total Equity of the Company the aggregate amount distributable as a preference upon dissolution of the Company to the holders of any then outstanding shares of any class or series of preferred stock (other than the Series B Preferred Stock), dividing the balance obtained by the sum of the number of shares of Common Stock then outstanding, the number of shares of Common Stock issuable upon conversion of any Series B Preferred Stock then outstanding, and the number of shares of Common Stock that Creditanstalt and/or its Affiliates could obtain upon exercise of any Warrants, and multiplying that per share amount by the aggregate number of Warrant Shares held by Creditanstalt and/or its Affiliates. Excess Consideration. The amount that a Holder would have realized following the Adjustment Event had the Call Option not been exercised by the Company until such time, minus the amount that such Holder realized due to the exercise of the Call Option; provided, however, that the amount of Excess Consideration will in all events be deemed to be at least zero. Exchange Act. The Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. Exchange Common Stock. This term is defined in Section 7.12 of the Stockholder Agreement. Exchange Company. This term is defined in Section 7.12 of the Stockholder Agreement. Exchange Notice. This term is defined in Section 7.12 of the Stockholder Agreement. Exercise Price. The price per share specified in Section 2.03 as adjusted from time to time pursuant to the provisions of this Agreement. Fair Market Value. (a) As to securities regularly traded in the organized securities markets, the Average Market Value; and (b) As to all securities not regularly traded in the securities markets and other property, the fair market value of such securities or property as determined in good faith by disinterested members of the Board of Directors of the Company at the time it authorizes the transaction (a "Valuation Event") requiring a determination of Fair Market Value under this Agreement; provided, however, that, at the election of the Holders or if there are no disinterested members of the Board of Directors of the Company, the Fair Market Value of such securities and other property will be the Appraised Value. Financial Statements. This term is defined in Section 3.01(i). First Amendment Closing Date. July 11, 1997. First Restated Purchase Agreement. This term is defined in the preamble to this Agreement. First Restatement Closing Date. January 8, 1998. Holders. Each Purchaser, and all other Persons holding Registrable Securities so long as such Purchasers or other Person holds Registrable Securities, except that none of the Company, any Stockholder or any Affiliate of the Company will at any time be a Holder. Indebtedness. This term shall mean, collectively but without duplication, (a) all indebtedness, obligations or other liabilities for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, that would, in accordance with GAAP, be classified as long-term debt, together with the current maturities thereof, (b) all indebtedness outstanding under any revolving credit, line of credit or similar agreement providing for borrowings (any extensions or renewals thereof), notwithstanding that any such indebtedness is created within one year of the expiration of such agreement, and (c) the principal component of Capital Lease Obligations (as defined in the Loan Agreement), in each case calculated on a consolidated basis for the Company and its Subsidiaries in accordance with GAAP. Indemnified Party. This term is defined in Section 6.01 hereof and in Section 11.01 of the Stockholder Agreement. Initial Holders. Each Purchaser and any Affiliate of such Purchaser to which any of the Warrants or any part of or interest in the Warrants is assigned. Intellectual Property. This term is defined in Section 3.01(q). Issuable Warrant Shares. Shares of Common Stock or Other Securities issuable on exercise of the Warrants. Issued Warrant Shares. Shares of Common Stock or Other Securities issued on exercise of the Warrants. Loan Agreement. This term shall mean the Amended and Restated Loan and Security Agreement dated as of date hereof (as such Agreement may be amended, restated, supplemented or modified from time to time), between the Company the Lenders named therein, Creditanstalt as the LC Issuer, Indosuez as the Co-Agent, and Creditanstalt as the Administrative Agent and Collateral Agent. Loan Warrants. This term shall mean the stock purchase warrants issued and/or issuable pursuant to the Amended and Restated Warrant Agreement dated as of December 16, 1997 (as such may be amended, restated, supplemented or modified from time to time) by and between the Company and Creditanstalt entitling the record holders thereof to purchase from the Company an aggregate of 612,579 shares of Common Stock or Series B Preferred Stock (the "Loan Warrants Shares") (in the percentages and to the extent, and subject to adjustment, as provided in such Warrant Agreement), issued to Creditanstalt in connection with certain loans made by Creditanstalt to the Company. Material Agreements. This term is defined in Section 3.01(k). Negotiation Period. This term is defined in the definition of Appraised Value. New Securities. Any Capital Stock other than Warrant Shares, Loan Warrant Shares and the Permitted Stock. Non-Attributable Stock. This term shall mean shares of Common Stock or Series B Preferred Stock which have been previously sold by, or were issued pursuant to the exercise of Warrants which were previously sold by, a Regulated Holder or an Affiliate of a Regulated Holder, either (a) in a widely dispersed public offering; (b) in a private placement in which no purchaser, individually or in concert with others, acquired Warrants, Common Stock, Series B Preferred Stock or any combination thereof, representing (upon conversion, in the case of the Series B Preferred Stock, and upon exercise for Common Stock, in the case of the Warrants) more than 2% of the outstanding Common Stock; (c) in compliance with Rule 144 (or any rule which is a successor thereto) of the Securities Act or (d) into the secondary market in a transaction executed through a registered broker-dealer in blocks of no more than 2.0% of the shares outstanding of the Company in any six-month period. Note. All or any portion of any of the Note (as defined in the Loan Agreement) and any and all documents evidencing the indebtedness under the Note and any refinancing, refunding, or replacement of the Note. Notice of Sale. This term is defined in Section 6.02(a) of the Stockholder Agreement. Operating Cash Flow. This term shall mean, for any period for which the same is computed, the sum of (i) the Company's and its Subsidiaries' consolidated net income (loss) for such period, plus (ii) the Company's and its Subsidiaries' interest expense for such period, plus (iii) the Company's and its Subsidiaries' depreciation and amortization for financial reporting purposes for such period, plus (iv) the Company's and its Subsidiaries' income tax expense for such period, computed in each case on a consolidated basis in accordance with generally accepted accounting principles. Original Closing Date. May 30, 1997. Original Purchase Agreement. This term is defined in the preamble. Other Securities. Any stock, other securities, property, or other property or rights (other than Common Stock) that the Holders become entitled to receive upon exercise of the Warrants, including, but not limited to, the Series B Preferred Stock. Permitted Stock. This term shall mean (a) Warrant Shares, and shares of the Company's Capital Stock issuable upon exercise thereof; (b) Capital Stock of the Company issued as a dividend on shares of the Company's Capital Stock or as a result of a stock split with respect thereto; (c) options and warrants outstanding (or that the Company's Board of Directors has approved for issuance to specific employees) as of the date hereof to purchase the Company's Capital Stock, and shares of the Company's Capital Stock issuable upon exercise thereof; (d) the Business Combination Options, and shares of the Company's Capital Stock issuable upon exercise thereof; (e) options to be granted after the Original Closing Date to employees of the Company and its Subsidiaries to purchase up to 335,286 shares of Common Stock of the Company, at an exercise price not less than the Fair Market Value at the time of issuance of such options, and shares of the Company's Capital Stock issuable upon exercise thereof; (f) shares of Series A Preferred Stock issuable pursuant to the Original Purchase Agreement or the First Restated Purchase Agreement; (g) shares of Series B Preferred Stock issuable pursuant to the First Restated Purchase Agreement or this Agreement; (h) shares of Common Stock issuable upon conversion of Series B Preferred Stock (i) 29,516 shares of Common Stock issuable to FF-ITP on the Third Amendment Closing Date; (j) 103,093 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $200,000; (k) 29,516 shares of Common Stock issuable to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $100,000; (l) 14,758 shares of Common Stock issuable to Martin and Haeyoung Kandl (jointly) at an aggregate purchase price of $50,000; and (m) 1,001 shares of Common Stock issuable to Thomas Gardner at an aggregate purchase price of $3,390. The limits in clauses (e), (i) (j), (k), (l) and (m) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. Person. This term will be interpreted broadly to include any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, company, institution, entity, party, or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body, or department of any of the foregoing). Preferred Shares. This term is defined in Section 2.01. Preferred Stock. This term means the Series A Preferred Stock and the Series B Preferred Stock of the Company. Purchaser. This term is defined in the preamble. Put Option. This term is defined in Section 4.01 of the Stockholder Agreement. Put Option Closing. This term is defined in Section 4.05 of the Stockholder Agreement. Put Option Period. This term is defined in Section 4.01 of the Stockholder Agreement. Put Price. This term is defined in Section 4.02 of the Stockholder Agreement. Put Shares. The Warrant Shares plus any other shares of Capital Stock owned from time to time by a Holder which were issued in respect of the Warrant Shares. "Register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act, and the declaration or ordering of the effectiveness of such registration statement. Registrable Securities. (a) The Issuable Warrant Shares, (b) the Issued Warrant Shares (c) the Preferred Shares and (d) the Conversion Shares that, in each case, have not been previously sold to the public. Regulated Holder. Any Purchaser or any Affiliate of any Purchaser subject to the provisions of (a) the Bank Holding Company Act of 1956, as amended; (b) Regulation Y of the Board of Governors of the Federal Reserve System (12 C.F.R. part 225), or (c) any law, rule or regulation that is a successor to either of the foregoing; provided that a "Regulated Holder" shall not include a Purchaser or an Affiliate of a Purchaser that is a small business investment company licensed by the Small Business Administration. Related Party. An entity wholly owned by a Selling Stockholder or one or more Related Parties. Schedule of Exceptions. This term is defined in Section 3.01. Second Amendment Closing Date. October 27, 1997. Second Restatement Closing Date. March 31, 1998. Selling Stockholder. This term is defined in Section 6.02 of the Stockholder Agreement. Securities Act. The Securities Act of 1933, as amended, and the rules and regulations thereunder. Series A Preferred Stock. Series A Preferred Stock, $.01 par value, of the Company having the rights, restrictions, privileges and preferences of the series of preferred stock designated as "Series A Preferred Stock" set forth in the Certificate. Series B Preferred Stock. Series B Preferred Stock, $.01 par value, of the Company having the rights, restrictions, privileges and preferences of the series of preferred stock designated as "Series B Preferred Stock" set forth in the Certificate. Stockholder. This term is defined in the preamble. Stockholder Agreement. This term shall mean the Amended and Restated Stockholder Agreement dated as of the date hereof (as such may be amended, restated, supplemented or otherwise modified from time to time) among the Company and the stockholders set forth therein, the provisions of which are incorporated in this Agreement by reference. Subsidiary. Each Person of which or in which the Company or its other Subsidiaries own directly or indirectly fifty percent (50%) or more of (i) the combined voting power of all classes of stock having general voting power under ordinary circumstances to elect a majority of the board of directors or equivalent body of such Person, if it is a corporation or similar person; (ii) the capital interest or profits interest of such Person, if it is a partnership, joint venture, or similar entity; or (iii) the beneficial interest of such Person, if it is a trust, association, or other unincorporated organization. Third Amendment Closing Date. October 31, 1997. Valuation Amount. This term shall mean, as of any date, the greater of (x) zero or (y) an amount equal to Operating Cash Flow for the most recently ended twelve months preceding the date of determination multiplied by six (6), less the principal amount of Indebtedness of the Company on such date of determination, plus the aggregate amount of cash and/or cash equivalents held by the Company on such date of determination. Valuation Event. This term is defined in the definition of Fair Market Value. Warrant A. Warrant A referred to in Section 2.01(a)(i), dated as of May 30, 1997, issued to Creditanstalt, and all Warrants issued upon the transfer or division of, or in substitution for, such Warrant A. Warrant B. Warrant B referred to in Section 2.01(b)(i), dated as of May 30, 1997, issued to FF-ITP, and all Warrants issued upon the transfer or division of, or in substitution for, such Warrant B. Warrant C. Warrant C referred to in Section 2.01(c)(i), dated as of July 11, 1997, issued to Creditanstalt, and all Warrants issued upon transfer or division of, or in substitution for, such Warrant C. Warrant D. Warrant D referred to in Section 2.01(d)(i), dated as of October 27, 1997, issued to Creditanstalt, and all Warrants issued upon transfer or division of, or in substitution for, such Warrant D. Warrant E. Warrant E referred to in Section 2.01(e)(i), dated as of January 8, 1998, issued to Creditanstalt, and all Warrants issued upon transfer or division of, or in substitution for, such Warrant E. Warrants. Collectively, Warrant A, Warrant B, Warrant C, Warrant D, Warrant E, the Loan Warrants, and all Warrants issued upon the transfer or the division of, or in substitution for, such Warrants. Warrant Shares. The Issued Warrant Shares and the Issuable Warrant Shares. Article II The Warrants and the Preferred Shares 2.01 The Warrants and the Preferred Shares. (a) On the Original Closing Date, Creditanstalt purchased from the Company at the purchase price set forth below, and the Company issued to Creditanstalt, all in accordance with the terms and conditions of the Original Purchase Agreement: (i) a Warrant A (relating to the Series A Preferred Stock), in substantially the form attached to the Original Purchase Agreement as Annex B and incorporated in this Agreement by reference, to purchase, at a purchase price of $.01 per share, the number of shares of Common Stock and/or Series B Preferred Stock set forth beneath the name of Creditanstalt on the signature page of this Agreement for such Warrant A; and (ii) 50,000 shares of Series A Preferred Stock at a purchase price of $500,000, or $10 per share, having the rights, restrictions, privileges, and preferences set forth in the Company's Certificate. (b) On the Original Closing Date, FF-ITP purchased from the Company, and the Company issued to FF-ITP, all in accordance with the terms and conditions of the Original Purchase Agreement; (i) a Warrant B (relating to the Series A Preferred Stock), in substantially the form attached to the Original Purchase Agreement as Annex C and incorporated in this Agreement by reference, to purchase, at a purchase price of $.01 per share, the number of shares of Common Stock set forth beneath the name of FF-ITP on the signature page of this Agreement for such Warrant B; (ii) 100,000 shares of Series A Preferred Stock, at a purchase price of $1,000,000, or $10 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. (c) On the First Amendment Closing Date, Creditanstalt purchased from the Company at the purchase price set forth below, and the Company issued to Creditanstalt, all in accordance with the terms and conditions of the Original Purchase Agreement: (i) a Warrant C (relating to the Series A Preferred Stock), in substantially the form attached to the Original Purchase Agreement as Annex G and incorporated in this Agreement by reference, to purchase, at a purchase price of $.01 per share, 120,335 shares of Common Stock and/or Series B Preferred Stock; and (ii) 23,334 shares of Series A Preferred Stock at a purchase price of $233,340, or $10 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. (d) On the Second Amendment Closing Date, Creditanstalt purchased from the Company at the purchase price set forth below, and the Company issued to Creditanstalt, all in accordance with the terms and conditions of the Original Purchase Agreement: (i) a Warrant D (relating to the Series A Preferred Stock), in substantially the form attached to the Original Purchase Agreement as Annex H and incorporated in this Agreement by reference, to purchase, at a purchase price of $.01 per share, 78,710 shares of Common Stock and/or Series B Preferred Stock; and (ii) 26,666 shares of Series A Preferred Stock at a purchase price of $266,660, or $10 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. (e) On the Third Amendment Closing Date, FF-ITP purchased from the Company at the purchase price set forth below, and the Company issued to FF-ITP, all in accordance with the terms and conditions of the Original Purchase Agreement: 10,000 shares of Series A Preferred Stock and 29,516 shares of Common Stock at an aggregate purchase price of $100,000. (f) On the First Restatement Closing Date, Creditanstalt purchased from the Company at the purchase price set forth below, and the Company issued to Creditanstalt, all in accordance with the terms and conditions of the First Restated Purchase Agreement: (i) a Warrant E (relating to the Series A Preferred Stock), in substantially the form attached to the First Restated Purchase Agreement as Annex I and incorporated in this Agreement by reference, to purchase, at a purchase price of $.01 per share, 188,680 shares of Common Stock and/or Series B Preferred Stock; (ii) 100,000 shares of Series A Preferred Stock at a purchase price of $1,000,000, or $10 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate; and (iii) 222,222 shares of Series B Preferred Stock at a purchase price of $1,000,000, or $4.50 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. (g) On the Second Restatement Closing Date, Indosuez agrees to purchase from the Company at the purchase price set forth below, and the Company agrees to issue to Indosuez, all in accordance with the terms and conditions of this Agreement: (i) 431,965 shares of Series B Preferred Stock at a purchase price of $2,000,000, or $4.63 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. (h) On the Second Restatement Closing Date, Wachovia agrees to purchase from the Company at the purchase price set forth below, and the Company agrees to issue to Wachovia, all in accordance with the terms and conditions of this Agreement. (i) 647,948 shares of Series B preferred stock at a purchase price of $3,000,000, or $4.63 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. On the Second Restatement Closing Date, the Company will deliver to each of Indosuez and Wachovia a certificate evidencing and representing the shares of Series B Preferred Stock, issued to each such Purchaser. The Company has duly authorized the Series A Preferred Stock and Series B Preferred Stock purchased and sold pursuant to the terms of this Agreement by duly filing the Certificate with the Secretary of State of the State of Delaware. The shares of Series A Preferred Stock and the shares of Series B Preferred Stock subject to the terms of this Agreement are sometimes referred to in this Agreement as the "Preferred Shares." 2.02 Legend. The Company will deliver to the appropriate Purchaser on the Second Restatement Closing Date, one or more certificates representing the Series B Preferred Stock, purchased by such Purchaser, in such denominations as such Purchaser requests. Such certificates will be issued in the Purchaser's name or, subject to compliance with transfer and registration requirements under applicable federal and state securities laws, in the name or names of its designee or designees. It is understood and agreed that the certificates evidencing any Warrants will bear the following legends: "THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS." "THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE TERMS AND PROVISIONS OF A SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT AND AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT, EACH DATED AS OF MARCH 31, 1998, BY AND AMONG IT PARTNERS, INC. (THE "COMPANY"), AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH AGREEMENTS (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT." It is further understood and agreed that the certificates evidencing the Preferred Shares issued under this Agreement and any certificates evidencing Conversion Shares will bear substantially the same as the following legends: "THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS." "THESE SHARES ARE SUBJECT TO THE TERMS AND PROVISIONS OF A SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT AND AN AMENDED AND RESTATED STOCKHOLDER AGREEMENT, EACH DATED AS OF MARCH 31, 1998, BY AND AMONG IT PARTNERS, INC. (THE "COMPANY"), AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH AGREEMENTS (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." "THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT." 2.03 Exercise Price. The Exercise Price per share will be $.01 for each share of Common Stock (and/or Series B Preferred Stock, if applicable) covered by the Warrants. 2.04 Exercise of Warrants. (a) Each of Warrant A and Warrant B may be exercised at any time or from time to time until the tenth (10th) anniversary of the Original Closing Date, Warrant C may be exercised at any time or from time to time until the tenth (10th) anniversary of the First Amendment Closing Date, Warrant D may be exercised at any time or from time to time until the tenth (10th) anniversary of the Second Amendment Closing Date, and Warrant E may be exercised at any time or from time to time until the tenth (10th) anniversary of the First Restatement Closing Date; each of the foregoing may be exercised on any day that is a Business Day, for all or any part of the number of Issuable Warrant Shares purchasable upon its exercise. In order to exercise its Warrant, in whole or in part, the Holder will deliver to the Company at the address designated by the Company pursuant to Section 6.06, (i) a written notice of such Holder's election to exercise its Warrant, which notice will specify the number of Issuable Warrant Shares to be purchased pursuant to such exercise, (ii) payment of the Exercise Price, in an amount equal to the aggregate purchase price for all Issuable Warrant Shares to be purchased pursuant to such exercise, and (iii) the Warrant. Such notice will be substantially in the form of the Subscription Form appearing at the end of the Warrants. Upon receipt of such notice, the Company will, as promptly as practicable, and in any event within ten (10) business days, execute, or cause to be executed, and deliver to such Holder a certificate or certificates representing the aggregate number of full shares of Common Stock and Other Securities issuable upon such exercise, as provided in this Agreement. The stock certificate or certificates so delivered will be in such denominations as may be specified in such notice and will be registered in the name of such Holder, or, subject to compliance with transfer and registration requirements under applicable federal and state securities laws, such other name as designated in such notice. A Warrant will be deemed to have been exercised, such certificate or certificates will be deemed to have been issued, and such Holder or any other Person so designated or named in such notice will be deemed to have become a holder of record of such shares for all purposes, as of the date that such notice, together with payment of the Exercise Price and the Warrant is received by the Company. If the Warrant has been exercised in part, the Company will, at the time of delivery of such certificate of certificates, deliver to such Holder a new Warrant evidencing the rights of such Holder to purchase the number of Issuable Warrant Shares with respect to which the Warrant has not been exercised, which new Warrant will, in all other respects, be identical with the Warrants, or, at the request of such Holder, appropriate notation may be made on the original Warrant and the original Warrant returned to such Holder. (b) Payment of the Exercise Price will be made, at the option of the Holder, by (i) company or individual check, certified or official bank check, (ii) cancellation of any debt owed by the Company to the Holder, or (iii) cancellation of Warrant Shares, valued at Fair Market Value. If the Holder surrenders a combination of cash or cancellation of any debt owed by the Company to the Holder or Warrants, the Holder will specify the respective number of shares of Common Stock and/or Series B Preferred Stock, if applicable, to be purchased with each form of consideration, and the foregoing provisions will be applied to each form of consideration with the same effect as if the Warrant were being separately exercised with respect to each form of consideration; provided, however, that a Holder may designate that any cash to be remitted to a Holder in payment of debt be applied, together with other monies, to the exercise of the portion of the Warrant being exercised for cash. (c) Creditanstalt and its Affiliates shall not have the right to have issued to it upon exercise Common Stock which, when aggregated with all other shares of Common Stock (other than shares of Non-Attributable Stock) currently or previously held by or currently issuable without restriction to such Warrant Holder, will exceed 4.99% of the then outstanding Common Stock unless such Warrant Holder certifies that such Warrants have previously been transferred either (i) in a widely dispersed public offering of the Warrants, or (ii) in a private placement in which no purchaser, individually or in concert with others, would have acquired more than 2% of the outstanding Common Stock if the Warrants so transferred had been exercised for Common Stock, or (iii) in compliance with Rule 144 (or any rule which is a successor thereto) of the Securities Act, or (iv) into the secondary market in a market transaction executed through a registered broker-dealer in blocks of no more than 2.0% of the shares outstanding of the Company in any six month period. In the event that Creditanstalt and/or one or more Affiliates attempt to exercise Warrants for Common Stock simultaneously and, if permitted, such exercises would cause the 4.99% limitation to be exceeded, then the Company shall notify such Warrant Holders who had attempted to exercise Warrants for Common Stock and each such Warrant Holder shall be entitled to exercise for Common Stock only such number of Warrants as shall equal the product of (i) the number of Warrants such Warrant Holder sought to exercise for Common Stock times (ii) a fraction, the numerator of which is the maximum number of Warrants which may be exercised for Common Stock without exceeding the 4.99% limitation and the denominator of which is the maximum number of Warrants sought to be exercised for Common Stock by such Warrant Holders. (d) Notwithstanding the foregoing provisions of this Section 2.04, in no event shall any Warrant be exercisable by Creditanstalt and/or an Affiliate for shares of Common Stock or Series B Preferred Stock which, when aggregated with all other Capital Stock of the Company (other than shares of Non-Attributable Stock) currently held or previously held by or currently issuable without restriction to Creditanstalt or its Affiliates, would, upon issuance, represent in excess of 24.99% of the Equity of the Company unless such shares, when issued, would constitute Non-Attributable Stock. 2.05 Taxes. The issuance of any Common Stock or Other Securities upon the exercise of any of the Warrants will be made without charge to any Holder for any tax, other than income taxes assessed on such Holder, in respect of such issuance. 2.06 Register. The Company will, at all times while any of the Warrants or Preferred Shares remain outstanding, keep and maintain at its principal office a register in which the registration, transfer, and exchange of the Warrants and Preferred Shares will be provided for. The Company will not at any time except upon the dissolution, liquidation, or winding up of the Company, close such register so as to result in preventing or delaying the exercise or transfer, as the case may be, of any of the Warrants or Preferred Shares. 2.07 Transfer and Exchange. The Warrants, all options and rights under the Warrants, and the Preferred Shares are transferable, in whole or in part, in person or by duly authorized attorney, on the books of the Company upon surrender of the Warrants or the Preferred Shares, as the case may be, at the principal offices of the Company, together with the form of transfer authorization attached to the Warrants duly executed or by endorsement of the certificates representing the Preferred Shares; provided, however, that such transfers of the Warrants and Preferred Shares will be made only to Persons that the transferor in good faith believes to be an "accredited investor" as such term is defined in Regulation D under the Securities Act. Absent any such transfer and subject to the Stockholder Agreement, the Company may deem and treat the registered Holders of the Warrants or the Preferred Shares, as the case may be, at any time as the absolute owners of the Warrants or the Preferred Shares, as the case may be, for all purposes and will not be affected by any notice to the contrary. If any of the Warrants or Preferred Shares are transferred in part the Company will, at the time of surrender of such Warrant or Preferred Shares, as the case may be, issue to the transferee a Warrant or a certificate for Preferred Shares, as the case may be, covering the number of shares transferred and to the transferor a Warrant or a certificate for Preferred Shares, as the case may be, covering the number of shares not transferred. 2.08 Adjustments to Number of Shares Purchasable. (a) At 12:01 a.m. on the first day of each March, June, September and December commencing September 1, 1997, for so long as shares of the Company's Series A Preferred Stock shall remain outstanding, the number of shares issuable upon exercise of each Warrant shall be increased by multiplying the number of shares theretofore issuable thereunder by one hundred two percent (102%), and the product derived thereby shall thereafter be the number of shares issuable upon exercise of such Warrant, without any adjustment in the exercise price of such Warrant. (b) The Warrants will be exercisable for the number of shares of Common Stock and/or Series B Preferred Stock, if applicable, in such manner that, following the complete and full exercise of the Warrants of each Holder, the amount of Common Stock and/or Series B Preferred Stock, if applicable, issued to all Holders will equal the aggregate number of shares of Common Stock and/or Series B Preferred Stock, if applicable, set forth beneath the name of the Purchaser on the signature pages of this Agreement, as adjusted, to the extent necessary, to give effect to the following events: (i) In case at any time or from time to time, the holders of any class of Common Stock or Common Stock Equivalent have received, or (on or after the record date fixed for the determination of shareholders eligible to receive) have become entitled to receive, without payment therefor: (A) consideration (other than cash) by way of dividend or distribution; or (B) consideration (including cash) by way of spin-off, split-up, reclas-sification (including any reclassification in connection with a consolidation or merger in which the Company is the surviving corporation), recapitalization, combination of shares into a smaller number of shares, or similar corporate restructuring; other than additional shares of Common Stock issued as a stock dividend or in a stock-split (adjustments in respect of which are provided for in Sections 2.08(b)(ii) and (iii)), then, and in each such case, the Holders, on the exercise of Warrants, will be entitled to receive for each share of Common Stock or Series B Preferred Stock, if applicable, issuable under the Warrants as of the record date fixed for such distribution, the greatest per share amount of consideration received by any holder of any class of Common Stock or Common Stock Equivalent or to which such Holder is entitled less the amount of any Dilution Fee actually and irrevocably paid to such Holders. All such consideration receivable upon exercise of such Warrant with respect to such a distribution will be deemed to be outstanding and owned by such Holder for purposes of determining the amount of consideration to which such Holder is entitled upon exercise of the Warrant with respect to any subsequent distribution. (ii) If at any time there occurs any stock split, stock dividend or distribution, reverse stock split, or other subdivision of the Common Stock, then the number of shares of Common Stock or Series B Preferred Stock, if applicable, to be received by the Holder of the Warrant and the Exercise Price, subject to the limitations set forth in this Agreement, will be proportionately adjusted. (iii) In case of any reclassification or change of outstanding shares of any class of Common Stock or Common Stock Equivalent (other than adjustments to the Series B Preferred Stock pursuant to the Certificate and other than a change in par value, or from par value to no par value, or from no par value to par value), or in the case of any consolidation of the Company with, or merger or share exchange of the Company with or into, another Person, or in case of any sale of all or a majority of the property, assets, business, income or revenue generating capacity, or goodwill of the Company, the Company, or such successor or other Person, as the case may be, will provide that the Holder of this Warrant will thereafter be entitled to receive the highest per share kind and amount of consideration received or receivable (including cash) upon such reclassification, change, consolidation, merger, share exchange, or sale by any holder of any class of Common Stock or Common Stock Equivalent that this Warrant entitles the Holder to receive immediately prior to such reclassification, change, consolidation, merger, share exchange, or sale (as adjusted pursuant to Section 2.08(b)(i) and otherwise in this Agreement). Any such successor Person, which thereafter will be deemed to be the Company for purposes of the Warrants, will provide for adjustments that are as nearly equivalent as may be possible to the adjustments provided for by this Section 2.08. (iv) If at any time the Company issues or sells any shares of any Common Stock or any Common Stock Equivalent (excluding any Permitted Stock) at a per unit or share consideration (which consideration will include the price paid upon issuance plus the minimum amount of any exercise, conversion, or similar payment made upon exercise or conversion of any Common Stock Equivalent) less than the Exercise Price or the then current Fair Market Value per share of Common Stock immediately prior to the time such Common Stock or Common Stock Equivalent is issued or sold (the "Additional Securities"), then: (A) the Exercise Price will be reduced (but not increased) to the lower of the prices calculated by: (I) dividing (x) an amount equal to the sum of (1) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance or sale multiplied by the then existing Exercise Price plus (2) the aggregate consideration, if any, received by the Company upon such issuance or sale, by (y) the total number of shares of Common Stock outstanding immediately after such issuance or sale on a fully diluted basis; and (II) multiplying the then existing Exercise Price by a fraction, the numerator of which is (x) the sum of (1) the number of shares of Common Stock outstanding on a fully diluted basis immediately prior to such issuance or sale, multiplied by the Fair Market Value per share of Common Stock immediately prior to such issuance or sale, plus (2) the aggregate consideration received by the Company upon such issuance or sale, (y) divided by the total number of shares of Common Stock outstanding on a fully diluted basis immediately after such issuance or sale, and the denominator of which is the Fair Market Value per share of Common Stock immediately prior to such issuance or sale (for purposes of this subsection (II), the date as of which the Fair Market Value per share of Common Stock will be computed will be the earlier of the date upon which the Company will (aa) enters into a firm contract for the issuance of such shares, or (bb) issues such shares); and (B) the number of shares of Common Stock or Series B Preferred Stock, if applicable, for which any of the Warrants may be exercised at the Exercise Price resulting from the adjustment described in subsection (A) above will be equal to the product of the number of shares of Common Stock or Series B Preferred Stock, if applicable, purchasable under such Warrants immediately prior to such adjustment multiplied by a fraction, the numerator of which is the Exercise Price in effect immediately prior to such adjustment and the denominator of which is the Exercise Price resulting from such adjustment. (v) In case any event occurs as to which the preceding Sections 2.08(b)(i) through (iv) are not strictly applicable, but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by the Warrants in accordance with the essential intent and principles of this Agreement, then, in each such case, the Holders may appoint an independent investment bank or firm of independent public accountants, which will give its opinion as to the adjustment, if any, on a basis consistent with the essential intent and principles established in this Agreement, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the Company will promptly deliver a copy of such opinion to the Holders and will make the adjustments described in such opinion. The fees and expenses of such investment bank or independent public accountants will be borne equally by the Holders and the Company. (c) The Company and the Stockholder will not by any action including, without limitation, amending, or permitting the amendment of, the charter documents, bylaws, or similar instruments of the Company or through any reorganization, reclassification, transfer of assets, consolidation, merger, share exchange, dissolution, issue or sale of securities, or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Agreement or the Warrants, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holders against impairment or dilution. Without limiting the generality of the foregoing, each of the Company and the Stockholder will (i) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock and Other Securities, free and clear of all liens, encumbrances, equities, and claims; (ii) use its best efforts to obtain all such authorizations, exemptions, or consents from any public regulatory body having jurisdiction as may be necessary to enable the Company to perform its obligations under the Warrants; and (iii) will take any action necessary to cause the par value per share of the Company's Common Stock and Series B Preferred Stock to be less than or equal to the Exercise Price of the Warrants. Without limiting the generality of the foregoing, the Company represents and warrants that the board of directors of the Company has determined the Exercise Price to be adequate and the issuance of the Warrants to be in the best interests of the Company. (d) Any calculation under this Section 2.08 will be made to the nearest one ten-thousandth of a share and the number of Issuable Warrant Shares resulting from such calculation will be rounded up to the next whole share of Common Stock or Other Securities comprising Issuable Warrant Shares. (e) The Company will not, and will not permit any Subsidiary to, issue any Capital Stock other than Common Stock and Common Stock Equivalents. 2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If any of the Warrants or certificates for Preferred Shares are lost, stolen, mutilated, or destroyed and if the Company receives a lost security affidavit containing an indemnification from the Holder of such Warrant or Preferred Shares and containing such other terms and providing for such bonding as may be reasonably requested by the Company, the Company will issue a new Warrant or certificate for Preferred Shares, as the case may be, of like denomination, tenor, and date as the Warrant or certificate for Preferred Shares, as the case may be, so lost, stolen, mutilated, or destroyed. Any such new Warrant or certificate for Preferred Shares, as the case may be, will constitute an original obligation of the Company, whether or not the allegedly lost, stolen, mutilated, or destroyed Warrant or certificate for Preferred Shares, as the case may be, is at any time enforceable by any Person. 2.10 Mandatory Redemption and Mandatory Exchange. (a) (i) Subject to the limitations hereinafter set forth, (A) if the Company takes any action with respect to its Capital Stock (including without limitation any purchase of its shares or any combination of shares or reverse stock split and elimination of fractional shares) which would cause the Capital Stock currently or previously held by or currently issuable without restriction to a Regulated Holder and its Affiliates (not including Non-Attributable Stock) to exceed 24.99 % of the Equity of the Company, then prior to or simultaneously with such action, the Company shall purchase from such Regulated Holder and/or its Affiliates such number of Warrants, Warrant Shares or other shares of Capital Stock as will reduce the shares of Capital Stock currently or previously held by or currently issuable without restriction to such Regulated Holder and its Affiliates (not including Non-Attributable Stock) to 24.99% of the Equity of the Company (any such mandatory purchase being herein called a "Mandatory Redemption"). The price to be paid to the Holder upon a Mandatory Redemption shall be an amount equal to the Valuation Amount at the date of the event causing such Mandatory Redemption occurs (the "Trigger Date"), multiplied by a fraction the denominator of which is the number of issued and outstanding shares of Common Stock of the Company at the Trigger Date, calculated on a fully diluted basis in accordance with generally accepted accounting principles, and the numerator of which is (Y) the aggregate number of shares of Common Stock of the Company (i) comprising the Warrant Shares to be purchased by the Company, and/or (ii) issuable upon exercise of the Warrants to be purchased by the Company, and/or (iii) issuable upon conversion of the Series B Preferred Stock comprising the Warrant Shares to be purchased by the Company, and/or (iv) issuable upon conversion of the Series B Preferred Stock issuable upon exercise of the Warrants to be purchased by the Company (assuming Series B Preferred Stock, rather than Common Stock, is then issuable under such Warrants), and/or (v) comprising any other shares of Capital Stock of the Company then held or previously held by a Regulated Holder or its Affiliates (excluding Non-Attributable Stock) (the "Redemption Price"). (ii) The completion of all purchases and sales of Warrants and Warrant Shares or other shares of Capital Stock pursuant to a Mandatory Redemption shall take place on the thirtieth (30th) day following the Trigger Date, unless another date is mutually agreed upon by the Company and the selling Holder (the "Redemption Closing Date"). The Redemption Prices for all such purchases and sales shall be paid by the Company issuing to the selling Holder in immediately available funds against delivery of certificates representing the Warrants, Warrant Shares and/or other shares of Capital Stock to be purchased, duly endorsed for transfer to the Company. (b) The Redemption Prices for all purchases and sales of Warrants, Warrant Shares and other shares of Capital Stock pursuant to a Mandatory Redemption shall be determined and calculated in accordance with subsection 2.10(a) by the Company's regularly engaged independent accountants. The Company shall cause such accountants to deliver to the Company and the selling Holder, not later than 15 days prior to the completion of each purchase and sale under subsection 2.10(a), a written statement, signed by such accountants, setting forth in reasonable detail the respective purchase price and the calculation thereof and stating that such calculation was based on the books and records of the Company and was made and delivered pursuant to this Section 2.10. (c) If the Company takes any action with respect to its capital stock (including without limitation any purchase of its shares or any combination of shares or reverse stock split and elimination of fractional shares) which would cause the Common Stock currently or previously held by or currently issuable without restriction to a Regulated Holder and its Affiliates (other than shares of Non-Attributable Stock) to exceed 4.99% of the aggregate number of issued and outstanding shares of Common Stock, prior to or simultaneously with such action, the Company shall exchange such portion of Common Stock for Series B Preferred Stock as will reduce the shares of Common Stock currently or previously held by or currently issuable without restriction to such Regulated Holder and its Affiliates (not including "Non-Attributable Stock") to 4.99% of the aggregate number of issued and outstanding shares of Common Stock (a "Mandatory Exchange"). Article III Representations and Warranties 3.01 Representations and Warranties of the Company. Subject to and except as disclosed in the Schedule of Exceptions attached hereto as Annex E (the "Schedule of Exceptions"), the Company represents and warrants to each Purchaser that: (a) The Company is a corporation duly organized and existing and in good standing under the laws of its state of incorporation and is qualified or licensed to do business in all other countries, states, and jurisdictions the laws of which require it to be so qualified or licensed. The Company has no Subsidiaries or debt or equity investment in any Person. Giving effect to the transactions contemplated herein, the Stockholder owns beneficially and of record the number of shares in the aggregate of the issued and outstanding capital stock or stock equivalents of the Company on a fully converted and diluted basis as of the Second Restatement Closing Date set forth under the signature of such Stockholder on this Agreement, all being free and clear of all liens, claims and encumbrances. Other than Purchaser, and, except for any other stock issuable under any employee or director stock plan which constitutes Permitted Stock, no Person has any rights, whether granted by the Company or any other Person, to acquire any portion of the equity interest of the Company or the assets of the Company. (b) Each of the Company and the Stockholder has, and at all times that this Agreement is in force will have, the right and power, and is duly authorized, to enter into, execute, deliver, and perform this Agreement, the Stockholder Agreement, and, in the case of the Company, the Warrants and the Preferred Shares, and the officers of Company executing and delivering this Agreement, the Warrants and the Preferred Shares are duly authorized to do so. This Agreement, the Warrants and the Preferred Shares have been duly and validly executed, issued, and delivered and constitute the legal, valid, and binding obligations of Company and the Stockholder, enforceable in accordance with their respective terms. (c) The execution, delivery, and performance of this Agreement, the Stockholder Agreement, the Warrants and the Preferred Shares will not, by the lapse of time, the giving of notice, or otherwise, constitute a violation of any applicable provision contained in the charter, bylaws, or organizational documents of the Company or contained in any agreement, instrument, or document to which the Company or the Stockholder is a party or by which any of them is bound. (d) As of the Second Restatement Closing Date and giving effect to all issuances on such date of shares of Common Stock, Series A Preferred Stock, and Series B Preferred Stock, the authorized capital stock of the Company consists of (i) 20,000,000 shares of Common Stock of which 7,693,526 shares will be issued and outstanding upon the Closing; and (ii) 6,000,000 shares of Preferred Stock, of which 600,000 shares have been designated Series A Preferred Stock, 331,800 of which will be issued and outstanding upon the Closing; 5,000,000 shares have been designated Series B Preferred Stock, 1,302,135 of which will be issued and outstanding upon the Closing; and the Company has (and will have as of the Closing) no other shares outstanding. An aggregate of 4,000,000 shares of Common Stock are reserved for issuance on the exercise of the Warrants and the Loan Warrants and conversion of the Series B Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are reserved for issuance on exercise of the Warrants and the Loan Warrants. An aggregate of 351,029 shares of Common Stock are reserved for issuance to employees of the Company and of Subsidiaries of the Company. All of the issued and outstanding shares of Common Stock are, and upon issuance and payment therefor in accordance with the terms of this Agreement, all of the outstanding Series A Preferred Stock and Series B Preferred Stock will be, validly issued, fully paid and nonassessable. The Common Stock, Series A Preferred Stock and Series B Preferred Stock have been offered, issued, sold, and delivered by the Company free from preemptive rights, rights of first refusal, antidilution rights, cumulative voting rights or similar rights (except as otherwise provided in this Agreement or in the powers, designations, rights and preferences of the Preferred Stock contained in the Certificate) and in compliance with applicable federal and state securities laws. Except pursuant to this Agreement and the Certificate and except for the Permitted Stock the Company is not obligated to issue or sell any Capital Stock and, except for this Agreement and the Stockholder Agreement, neither the Company nor the Stockholder is party to, or otherwise bound by, any agreement affecting the voting of any Capital Stock. Except for the Stockholder Agreement and the Loan Warrant Agreement, the Company is not, nor will it be, a party to, or otherwise bound by, any agreement obligating it to register any of its Capital Stock. (e) The Preferred Shares, the shares of Common Stock and Other Securities issuable on exercise of the Warrants and the shares of Common Stock issuable upon conversion of the Series B Preferred Stock have been duly and validly authorized and reserved for issuance and, when issued in accordance with the terms of this Agreement, the Warrants or the Certificate, as the case may be, will be validly issued, fully paid, and nonassessable and free of preemptive rights, rights of first refusal, or similar rights. (f) The Company has good, indefeasible, merchantable, and marketable title to, and ownership of, all of its assets necessary for the conduct of its business free and clear of all liens, pledges, security interests, claims, or other encumbrances except those of the Collateral Agent under the Loan Agreement. (g) There is no agreement, arrangement, or understanding involving the Company or the Stockholder, other than this Agreement, the Stockholder Agreement, and the documents contemplated hereby and thereby, modifying, restricting, or in any way affecting the rights of any security holder to vote securities of the Company. (h) The Company has delivered to the Purchaser audited financial statements of the Company at December 31, 1997 for the fiscal year then ended and its unaudited financial statements at and for the one-month period ended January 31, 1998 (collectively, the "Financial Statements"). The Financial Statements are complete and correct in all material respects, subject (in the case of the unaudited statements) to normal year-end adjustments, and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods indicated. The Financial Statements accurately set out, describe and fairly present the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein, subject (in the case of the unaudited statements) to normal year-end audit adjustments. (i) Since January 31, 1998, there has not been: (A) any change in the assets, liabilities, financial condition or operating results of the Company from that reflected in the Financial Statements, except changes in the ordinary course of business that have not been, in the aggregate, materially adverse; (B) any damage, destruction or loss, whether or not covered by insurance, materially and adversely affecting the assets, properties, financial condition, operating results, prospects or business of the Company (as such business is presently conducted and as it is currently proposed to be conducted); (C) any amendments or changes in the certificate of incorporation or bylaws of the Company; other than the Certificate of Amendment of the Certificate of Incorporation of the Company, filed on March 31, 1998; (D) any waiver or compromise by the Company of a valuable right or of a material debt owed to the Company; (E) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and that is not material to the assets, properties, financial condition, operating results or business of the Company (as such business is presently conducted and as it is currently proposed to be conducted); (F) any change or amendment to a material contract or arrangement by which the Company or any of its assets or properties is bound or subject; (G) any declaration or payment of any dividend or other distribution of the assets of the Company; (H) any increase in or modification of the compensation or benefits payable by the Company to any of their directors or employees, except in the ordinary course of business consistent with past practice; (I) any increase in or modification of any bonus, pension, insurance or other employee benefit plan, payment or arrangement (including, but not limited to, the granting of stock options, restricted stock awards or stock appreciation rights) made to, for or with any employee of the Company, except in the ordinary course of business consistent with past practice; (J) any incurrence, assumption or guarantee by the Company of any debt for borrowed money; issuance or sale of any securities convertible into or exchangeable for debt securities of the Company; or issuance or sale of options or other rights to acquire from the Company, directly or indirectly, debt securities of the Company, or any securities convertible into or exchangeable for any such debt securities; (K) any making of any loan, advance or capital contribution to any person other than travel loans or advances made in the ordinary course of business; or (L) any labor dispute, other than routine individual grievances, or any activity or proceeding by a labor union or representative thereof to organize any employees of the Company. (j) The Schedule of Exceptions contains a complete list of all of the following agreements to which the Company is a party: (a) all contracts, agreements and instruments that involve a commitment by the Company in excess of $10,000; (b) all stock purchase agreements; (c) all loan, lease or debt agreements in excess of $10,000; (d) all employment agreements with Stockholders; (e) all material licenses of any patent, trade secret or other proprietary right to or from the Company; (f) any existing or currently effective plan, contract or arrangement, whether written or oral, providing for bonuses, pensions, deferred compensation, severance pay or benefits, retirement payments, profit-sharing or the like; or (g) any other existing or currently effective agreement, contract or commitment that is material to the Company (collectively, the "Material Agreements"). All the Material Agreements are valid and binding obligations of the Company, in full force and effect in all material respects. The Company is not in material default under any of the Material Agreements, and the Company is not aware of any material default by another party, either pending or threatened, with respect to the Material Agreements. The Company does not intend to cancel, withdraw, modify or amend any such Material Agreement and neither has been notified that any other party to any such Material Agreement intends to cancel, withdraw, modify or amend such Material Agreement. The Company is not a party to or bound by any material contract agreement or instrument, or subject to any restriction under its certificate of incorporation or bylaws, that adversely affects its business as presently conducted or as currently proposed to be conducted, its properties or its financial condition. (k) The Company has no material liability or obligation, absolute or contingent (individually or in the aggregate), that is not disclosed in the Financial Statements, except obligations and liabilities incurred after the date of the Financial Statements in the ordinary course of business that are not individually or in the aggregate material. The Company after reasonable investigation has no knowledge of any basis for any other claim against or liability or obligation of the Company. (l) Set forth on the Schedule of Exceptions is a list of (a) all the material obligations of the Company to its officers, directors, shareholders and employees, including any member of their immediate families (other than normal accrued wages and benefits and travel expense vouchers) and (b) all the obligations of the officers, directors, shareholders and employees of the Company, including any member of their immediate families (other than expense advances made in the ordinary course of business) to the Company, which schedule is complete and correct in all material respects as of the date of this Agreement. (m) To the best of the Company's knowledge, no employee of the Company is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency that would conflict with such employee's obligation to use his best efforts to promote the interests of the Company or that would conflict with the Company's business as conducted or as proposed to be conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company's business by the employees of the Company, nor the conduct of the Company's business as currently proposed, will, to the Company's knowledge, conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which any of such employees is now obligated. To the best of the Company's knowledge, no employee or consultant of the Company is in violation of any term of any employment contract, proprietary information and inventions agreement, noncompetition agreement or any other contract or agreement relating to the relationship of any such employee or consultant with the Company or any previous employer. To the best of the Company's knowledge, no officer of the Company, the termination of whose employment, either individually or in the aggregate, would have a materially adverse effect on the Company, has any present intention of terminating his or her employment with the Company. The Company has no collective bargaining agreements with any of its employees and to the best of the Company's knowledge there is no labor-union-organizing activity pending or threatened with respect to the Company. (n) The Company is not in violation of any provisions of its certificate of incorporation or its bylaws as amended and in effect on and as of the Closing, or of any provisions of any material instrument or contract to which it is a party or any judgment, decree or order by which it is bound or any statute, rule or regulation applicable to it. The execution, delivery and performance of this Agreement, the Stockholder Agreement and the issuance and sale of the Preferred Shares and Warrants pursuant hereto and the issuance of the Conversion Shares upon conversion of the Series B Preferred Shares and the Issuable Warrant Shares pursuant to the exercise of the Warrants, will not result in any such violation or be in conflict with or constitute a default under any such provisions or result in the creation of any mortgage, pledge, lien, encumbrance or charge upon any properties or assets of the Company. (o) To the best of the Company's knowledge, there is no action, proceeding or investigation pending or currently threatened against the Company before any court or administrative agency (or any basis therefor known to the Company). The foregoing includes, without limiting its generality, actions pending or threatened (or any basis therefor known to the Company) involving the prior employment of any of the Company's employees or their use in connection with the Company's business of any information or techniques allegedly proprietary to any of their former employers. There is no action, proceeding or investigation by the Company currently pending or that the Company intends to initiate. (p) To the best of the Company's knowledge, the Company has sufficient title and ownership of or is licensed under all patents, trademarks, service marks, trade names, copyrights, and all registrations and applications for registration of any of the foregoing, and all trade secrets, information, inventions, computer programs owned or licensed by the Company, documentation, proprietary rights and processes (collectively, "Intellectual Property") necessary for its business as now conducted and as currently proposed to be conducted without any conflict with or without infringement of the rights of others. There are no outstanding material options, licenses or agreements relating to the foregoing nor is the Company bound by or a party to any material options, licenses or agreements with respect to the patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses, information, proprietary rights and processes of any other person or entity. The Company has not received any communications alleging that it has violated or, by conducting its businesses as currently proposed, would violate any of the patents, trademarks, service marks, trade names, copyrights or trade secrets or other proprietary rights of any other person or entity. The Company does not believe it is or will be necessary to use any inventions of any of its employees (or people it currently intends to hire) made prior to their employment by the Company. (q) To the best of the Company's knowledge, the Company has not done anything to compromise the secrecy, confidentiality or value of any of its trade secrets, know-how, inventions, prototypes, designs, processes or technical data required to conduct its business as now conducted or as proposed to be conducted. The Company has taken in the past and will take in the future reasonable security measures to protect the secrecy, confidentiality and value of all its trade secrets, know-how, inventions, prototypes, designs, processes, and technical data important to the conduct of its business. (r) The Company has accurately prepared and timely filed all United States income tax returns and all state and municipal tax returns that are required to be filed by it and has paid or made provision for the payment of all taxes that have become due pursuant to such returns. No deficiency assessment or proposed adjustment of the Company's United States income tax or state or municipal taxes is pending and the Company has no knowledge of any liability as of the date hereof for any tax for which there is not an adequate reserve reflected in the Financial Statements. (s) The Company has fire, casualty and liability insurance policies customary for the type and scope of its properties and business. (t) All consents, approvals, orders or authorizations of, or registrations, qualifications, designations, declarations or filings with any federal or state governmental authority on the part of the Company required in connection with the valid execution and delivery of this Agreement and the Stockholder Agreement, the offer, sale or issuance of the Preferred Shares, the Conversion Shares, the Warrants, the Issuable Warrant Shares, or the consummation of any other transaction contemplated hereby have been obtained, or will be obtained prior to the Closing, except for notices required to be filed with certain state and federal securities commissions after the Closing, which notices will be filed on a timely basis. (u) The Company (i) represents and warrants that it has retained no finder or broker in connection with the transactions contemplated by this Agreement and (ii) hereby agrees to indemnify and to hold the Purchaser harmless of and from any liability for any commission or compensation in the nature of a finder's fee to any broker or other person or firm (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its employees or representatives is responsible. (v) Each of the representations and warranties made by the Company pursuant to the Loan Agreement is true and correct in all material respects. (w) None of the documents, instruments, or other information furnished to the Purchaser by the Company or the Stockholder, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make any statements made therein not misleading. No representation, warranty, or statement made (i) by the Company in this Agreement, the Loan Agreement, or the Stockholder Agreement, or (ii) by the Stockholder made in this Agreement or the Stockholder Agreement, or in any applicable document, certificate, exhibit or schedule attached hereto or thereto or delivered in connection herewith or therewith, contains or, at the Second Restatement Closing Date, will contain any untrue statement of a material fact, or, at the Second Restatement Closing Date, omits or will omit to state a material fact necessary to make any statements made herein or therein not misleading. There is no fact that materially and adversely affects the condition (financial or otherwise), results of operations, business, properties, or prospects of the Company that has not been disclosed in the documents provided to the Purchaser. 3.02 Representations and Warranties of the Purchaser. Each Purchaser represents and warrants severally and not jointly to the Company: (a) It is a corporation, limited partnership or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. (b) It has the right and power and is duly authorized to enter into, execute, deliver, and perform this Agreement and the Stockholder Agreement, and its officers, managers or agents executing and delivering this Agreement and the Stockholder Agreement are duly authorized to do so. This Agreement and the Stockholder Agreement has been duly and validly executed, issued, and delivered and constitutes the legal, valid, and binding obligation of such Purchaser, enforceable in accordance with their respective terms. (c) It (i) is an "accredited investor," as that term is defined in Regulation D under the Securities Act; (ii) has such knowledge, skill, and experience in business and financial matters, based on actual participation, that it is capable of evaluating the merits and risks of an investment in the Company and the suitability thereof as an investment for each Purchaser; (iii) has received and reviewed all such financial and other information and records of the Company as it considered necessary or appropriate in deciding whether to purchase the Preferred Shares and the Warrants and any securities issuable upon exercise of the Warrants, and the Company and the Stockholder have made available to it the opportunity to ask questions of, and to receive answers and to obtain additional information from, representatives of the Company and the Stockholder; (iv) all such additional information has been provided to and reviewed by it; and (v) it has the ability to bear the economic risks of losing its entire investment in the Preferred Shares and the Warrants and any securities issuable upon exercise of the Warrants. (d) Except as otherwise contemplated by this Agreement and the Stockholder Agreement, each Purchaser is acquiring its Series A Preferred Stock, its Series B Preferred Stock, and/or its Warrants and any securities issuable upon exercise of the Warrants or upon conversion of the Series B Preferred Stock for investment for its own account and not with a view to any distribution thereof in violation of applicable securities laws. (e) It agrees that the certificates representing its Preferred Shares, its Warrants, any Issued Warrant Shares and any Conversion Shares will bear the legends referenced in this Agreement, and such Preferred Shares, Warrants or securities issuable upon exercise of the Warrants and pursuant to the Stockholder Agreement, as the case may be, will not be offered, sold, or transferred in the absence of registration or exemption under applicable securities laws. (f) It has no current contract, undertaking, agreement, arrangement or understanding with any Person to sell, transfer, grant any participation in, or otherwise distribute any of the Preferred Shares, the Warrants or any securities issuable upon exercise of the Warrants or upon conversion of the Series B Preferred Shares to any Person. Article IV Covenants 4.01 Financial Statements. The Company will keep books of account and prepare financial statements and will cause to be furnished to each Purchaser and each other Holder (all of the foregoing and following to be kept and prepared in accordance with United States generally accepted accounting principles applied on a consistent basis): (a) As soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, beginning with the fiscal year ending December 31, 1997, (i) a copy of the financial statements of the Company for such fiscal year containing a consolidated and consolidating balance sheet, statement of income, statement of stockholders' equity, and statement of cash flows, each as at the end of such fiscal year and for the period then ended and in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by Arthur Andersen LLP, or other independent certified public accountants of recognized standing selected by the Company and consented to by the Holders and (ii) a comparison of the actual results during such fiscal year to those originally budgeted by the Company prior to the beginning of such fiscal year and a narrative description and explanation of any budget variances. The annual audit report required by this Agreement will not be qualified by or make reference to any disclosure that the Company may not continue as a going concern or otherwise be qualified or limited because of restricted or limited examination by the accountant of any portion of any of the records of the Company. (b) As soon as available, and in any event within thirty (30) days after the end of each calendar month, a copy of unaudited consolidated and consolidating financial statements of the Company as of the end of such calendar month and for the portion of the fiscal year then ended, containing a balance sheet, a statement of retained earnings, statement of income, and statement of cash flows, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year and all in reasonable detail, including, without limitation, a comparison of the actual results during such period to those originally budgeted by the Company prior to the beginning of such fiscal period and for the fiscal year to date. (c) Within forty-five (45) days after the beginning of each fiscal year, an annual budget or business plan for such fiscal year, including a projected consolidated and consolidating balance sheet, income statement, and cash flow statement for such year, and, promptly during each fiscal year, all revisions thereto approved by the board of directors of the Company. (d) Concurrently with the delivery of each of the financial statements referred to in Section 4.01(a) and, on the request of any Purchaser, Section 4.01(b), a certificate of an authorized officer of the Company in form and substance satisfactory to the Holders (i) certifying that the financial statements attached to such certificates have been prepared in accordance with generally accepted accounting principles consistently applied and fairly and accurately present (subject to year-end audit adjustments) the consolidated and consolidating financial condition and results of operations of the Company at the date and for the period indicated therein, and (ii) containing a narrative report of the business and affairs of the Company that includes, but is not limited to, a discussion of the results of operations compared to those originally budgeted for such period by the Company prior to the beginning of such period. (e) As soon as available, a copy of each (i) financial statement, report, notice, or proxy statement sent by the Company to its stockholders; (ii) regular, periodic, or special report, registration statement, or prospectus filed by the Company with any securities exchange, state securities regulator, or the Commission; (iii) material order issued by any court, governmental authority, or arbitrator in any material proceeding to which the Company is a party or to which any of its assets is subject; (iv) press release or other statement made available generally by the Company or the Stockholder to the public generally concerning material developments in the business of the Company; and (v) item of correspondence, report, or other information sent by the Company to any holder of any indebtedness, including, without limitation the lenders under the Loan Agreement. (f) Promptly, such additional information concerning the Company as any Holder may request, including, without limitation, auditor management reports and audit "waive" lists. 4.02 Inspection. The Company will permit any representative designated by a Holder to (a) visit and inspect any of the properties of the Company; (b) examine the corporate and financial records of Company and make copies thereof or extracts therefrom; and (c) discuss the affairs, finances, and accounts of the Company with the directors, officers, key employees, and independent accountants of the Company. The inspections, examinations and discussions provided for in the preceding sentence shall be conducted during normal business hours, shall be reasonable in scope and shall not disrupt or adversely affect any aspect of the operations of the Company. 4.03 Existence. Except as otherwise expressly required or permitted by the Loan Agreement or this Agreement, the Company will maintain in full force and effect its corporate existence, rights, and franchises and all licenses and other rights to use Intellectual Property. 4.04 Notice. (a) In the event of (i) any setting by the Company of a record date with respect to the holders of any class of Capital Stock for the purpose of determining which of such holders are entitled to dividends, repurchases of securities or other distributions, or any right to subscribe for, purchase or otherwise acquire any shares of Capital Stock or other property or to receive any other right; or (ii) any capital reorganization of the Company, or reclassification or recapitalization of the Capital Stock or any transfer of all or a majority of the assets, business, or revenue or income generating capacity of the Company, or consolidation, merger, share exchange, reorganization, or similar transaction involving the Company; or (iii) any voluntary or involuntary dissolution, liquidation, or winding up of the Company; or (iv) any proposed issue or grant by the Company of any Capital Stock, or any right or option to subscribe for, purchase, or otherwise acquire any Capital Stock (other than the issue of Issuable Warrant Shares upon exercise of the Warrants or the issue of Conversion Shares upon conversion of the Series B Preferred Stock), then, in each such event, the Company will deliver or cause to be delivered to the Holders a notice specifying, as the case may be, (A) the date on which any such record is to be set for the purpose of such dividend, distribution, or right, and stating the amount and character of such dividend, distribution, or right; (B) the date as of which the holders of record will be entitled to vote on any reorganization, reclassification, recapitalization, transfer, consolidation, merger, share exchange, conveyance, dissolution, liquidation, or winding-up; (C) the date on which any such reorganization, reclassification, recapitalization, transfer, consolidation, merger, share exchange, conveyance, dissolution, liquidation, or winding-up is to take place and the time, if any is to be fixed, as of which the holders of record of any class of Capital Stock will be entitled to exchange their shares of Capital Stock for securities or other property deliverable upon such event; and (D) the amount and character of any Capital Stock property, or rights proposed to be issued or granted, the consideration to be received therefor, and, in the case of rights or options, the exercise price thereof, and the date of such proposed issue or grant and the Persons or class of Persons to whom such proposed issue or grant will be offered or made. Any such notice will be deposited in the United States mail, postage prepaid, at least thirty (30) days prior to the date therein specified, and notwithstanding anything in this Agreement or the Warrants to the contrary the Holders may exercise the Warrants within thirty (30) days from the mailing of such notice. The Company shall, promptly on request of a Holder, provide such other information as the Holders may reasonably request. (b) If there is any adjustment as provided above in Article II (other than as provided in Section 2.08(a)), or if any Other Securities (other than Series B Preferred Stock) become issuable in lieu of shares of such Common Stock upon exercise of the Warrants, the Company will immediately cause written notice thereof to be sent to each Holder, which notice will be accompanied by a certificate of the independent public accountants of the Company setting forth in reasonable detail the basis for the Holders' becoming entitled to receive such Other Securities, the facts requiring any such adjustment in the number of shares receivable after such adjustment, or the kind and amount of any Other Securities so purchasable upon the exercise of the Warrants, as the case may be. At the request of any Holder and upon surrender of the Warrant of such Holder, the Company will reissue such Warrant of such Holder in a form conforming to such adjustments. 4.05 Warrant Rights. The Company covenants and agrees that during the term of this Agreement and so long as any of the Warrants are outstanding, (a) the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock and Other Securities, to provide for the exercise in full of the rights represented by the Warrants and the exercise in full of the rights of the Holders under the Stockholder Agreement; (b) the Company will not increase or permit to be increased the par value per share or stated capital of the Issuable Warrant Shares or the consideration receivable upon issuance of its Issuable Warrant Shares; and (c) in the event that the exercise of the Warrants would require the payment by the Holder of consideration for the Common Stock or Other Securities receivable upon such exercise of less than the par or stated value of such Issuable Warrant Shares, the Company and the Stockholder will promptly take such action as may be necessary to change the par or stated value of such Issuable Warrant Shares to an amount less than or equal to such consideration. 4.06 Certain Actions. Without the prior written consent of each of FF-ITP and, in the case of subparagraphs (a), (b), (d), (e), (f), (m), (n), (o), and (p), the consent of the holders of a majority of the outstanding shares of Series B Preferred Stock (other than shares held by a Regulated Holder), which consent may be withheld for any reason, the Company will not, and will not permit any Subsidiary to: (a) permit to occur any amendment, alteration, or modification of the bylaws of the Company, as constituted on the date of this Agreement, the effect of which, in the judgment of FF-ITP and the holders of a majority of the outstanding shares of Series B Preferred Stock (other than shares held by a Regulated Holder), would be to alter, impair, or affect adversely, either the rights and benefits of the Holders or the duties and obligations of the Company under this Agreement, the Warrants, the Certificate or the Stockholder Agreement or permit to occur any amendment, alteration, or modification of the other charter or organizational documents of the Company, as constituted on the date of this Agreement except to the extent necessary to comply with Section 4.04(j) or 4.10; (b) except as otherwise permitted in the Certificate or those Stock Repurchase Agreements dated May 30, 1997, between the Company and each of Daniel F. Klein and Jamie Blech, or as required by the Stockholder Agreement or the Loan Warrant Agreement, (i) declare or make any dividends or distributions of its cash, stock property, or assets or redeem, retire, purchase, or otherwise acquire, directly or indirectly, any of the Capital Stock or capital stock or securities of any Affiliate or any Subsidiary of the Company, or any securities convertible or exchangeable into Capital Stock or capital stock or securities of any Affiliate or any Subsidiary of the Company or otherwise make any distribution on account of the purchase, repurchase, redemption, put, call or other retirement of any shares of Capital Stock of the Company or any Subsidiary thereof or of any warrant, option or other right to acquire such shares, or (ii) pay any professional consulting or management fees or any other payments to any shareholders of Parent or any Subsidiary; provided, however, that the Company shall be permitted as exceptions to the preceding provisions of this clause (b): to declare and make payments of (A) dividends in cash from Subsidiaries of the Company to the Company to the extent necessary to permit the Company or its Subsidiaries to pay amounts due and payable under the Loan Agreement, and (B) dividends on the Preferred Stock as provided in the Certificate; (c) effect any sale, lease, assignment, transfer, or other conveyance of any material portion of the assets or operations or the revenue or income generating capacity of the Company (other than inventory in the ordinary course of business and other assets reasonably and in good faith determined by the Company to be obsolete or no longer necessary to the business of the Company), or to take any such action that has the effect of any of the foregoing; (d) except for issuances of stock permitted by this Agreement, the Permitted Stock, and the mergers permitted by the Loan Agreement or pursuant to the express terms of this Agreement or the Stockholder Agreement, issue or sell, or otherwise dispose of any Capital Stock (including the Series A Preferred Stock) or Capital Stock of any Subsidiary, dissolve or liquidate, or effect any consolidation or merger involving the Company or any Subsidiary or any reclassification, corporate reorganization, stock split or reverse stock split, or other change of any class of Capital Stock of the Company or of any Subsidiary; (e) issue any Capital Stock unless the holder of such Capital Stock either (i) has become a party to the Stockholder Agreement, or (ii) owns, after such issuance, less than three percent (3%) of the Company's Common Stock, assuming full exercise or conversion of all outstanding securities exercisable for or convertible into Common Stock. (f) enter into any business that the Company or any Subsidiary is not conducting on the date of this Agreement or acquire any substantial business operation or assets (through a stock or asset purchase or otherwise except for businesses and acquisitions permitted by the Loan Agreement); (g) except for Permitted Stock, enter into any transaction or transactions with any director, officer, employee, or stockholder of the Company, or any Affiliate or relative of the foregoing except upon terms that, in the opinion of the FF-ITP, are fair and reasonable and that are, in any event, at least as favorable as would result in a comparable arm's-length transaction with a Person not a director, officer, employee, shareholder, or Affiliate of the Company or any Affiliate or related party of the foregoing, or advance any monies to any such Persons, except for travel advances in the ordinary course of business; (h) increase the amount of remuneration paid to officers under the employment agreements disclosed with respect to Section 3.01(k) of this Agreement (the "Employment Agreements"); (i) modify, amend, terminate or waive any material provision of the Employment Agreements; (j) allow the aggregate par value of the Capital Stock subject to the Warrants from time to time to exceed the price payable upon exercise of the Warrants, as adjusted from time to time; (k) fail to achieve $30,000,000 in net revenue and $1,500,000 in EBITDA for the year ending one year after the Original Closing Date; $60,000,000 in net revenue and $3,500,000 in EBITDA for the year ending two years after the Original Closing Date; and $90,000,000 in net revenue and $5,500,000 in EBITDA for the year ending three years after the Original Closing Date; (l) fail to comply, in all material respects, with all applicable statutes, regulations, and orders of the United States, domestic and foreign states, and municipalities, agencies, and instrumentalities of the foregoing applicable to the Company; (m) fail to file all required tax returns, reports, and requests for refunds on a timely basis or pay on a timely basis all taxes imposed on either it, or upon any of its assets, income or franchises; provided, however, that neither the Company nor any Subsidiary shall be required to pay or discharge any tax, levy, assessment, or governmental charge that is being contested in good faith by appropriate proceedings diligently pursued, and for which adequate reserves in accordance with generally accepted accounting principles, consistently applied, have been establis-hed; (n) authorize or issue stock to Jamie Blech or Daniel J. Klein, or any Affiliate or Related Party of the foregoing; (o) fail to keep books and records of account in which full, true, and correct entries will be made of all dealings and transactions in relation to its business and affairs in accordance with generally accepted accounting principles applied on a consistent basis; (p) create or authorize any class or series of capital stock ranking prior to or pari passu with the Series A Preferred Stock with respect of the payment of dividends or the distribution of assets upon a liquidation, or create or authorize any rights, options or warrants exercisable for, or securities convertible into or exchangeable for, shares of any such class or series of capital stock; (q) except for Permitted Stock, authorize the issuance of the Company's equity securities at a price per share of less than their Fair Market Value; or (r) obligate itself or otherwise agree to take, permit or enter into any of the events described in subsections (a) through (q) above. 4.07 Accountants. The Company will retain independent public accountants acceptable to FF-ITP who will certify the consolidated and, at FF-ITP's request, consolidating financial statements of the Company and its Subsidiaries at the end of each fiscal year, and in the event that the services of the independent public accountants so selected, or any firm of independent public accounts hereafter employed by Company or any Subsidiary, are terminated, the Company will promptly thereafter notify FF-ITP and upon FF-ITP's request, the Company will request the firm of independent public accountants whose services are terminated to deliver (without liability for such firm) to FF-ITP a letter of such firm setting forth the reasons for the termination of their services and in its notice to FF-ITP the Company or such Subsidiary will state whether the change of accountants was recommended or approved by the board directors of the Company or any Subsidiaries or any committee thereof. 4.08 Each of the Regulated Holders Not a Party to Covenants. The Regulated Holders and the other parties hereto agree that (a) the covenants set forth in Sections 4.06 and 4.07 hereof shall not inure to the benefit of any Regulated Holder or its successors or assigns; (b) neither a Regulated Holder nor its successors or assigns shall have the right to enforce such covenants or the right to give consents or waivers in connection therewith; and (c) the effectiveness of any and all amendments, consents, waivers or other actions required or requested of the Holders under Section 4.06 hereof shall be determined as if such Regulated Holder or its successors and assigns were not Holders hereunder. Article V Conditions The obligations of each Purchaser to effect the transactions contemplated by this Agreement are subject to the following conditions precedent: 5.01 Opinion. Each Purchaser will have received a favorable opinion, dated the Second Restatement Closing Date, from counsel for the Company, covering matters raised by this Agreement, the Stockholder Agreement, and such other matters as any Purchaser or its counsel may request, and otherwise in form and substance satisfactory to each Purchaser and its counsel. 5.02 Loan Agreement Conditions. All of the conditions precedent to the obligations of Purchaser under the Loan Agreement will have been satisfied in full. 5.03 Material Change. There will have occurred no material adverse change in the business, prospects, results of operations, or condition, financial or otherwise, of the Company. 5.04 Stockholder Agreement. The Company and the Stockholders will have entered into the Stockholder Agreement with Purchaser. 5.05 Representations and Agreements. Each representation and warranty of the Company and the Stockholders set forth in this Agreement will be true and correct in all material respects when made and as of the Second Restatement Closing Date, and the Company and the Stockholders will have fully performed all their covenants and agreements set forth in this Agreement in all material respects. 5.06 Proceedings; Consents. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation of this Agreement, will be satisfactory in form and substance to the Purchaser and its counsel, and the Purchaser and its counsel will have received certificates of compliance and copies (executed or certified as may be appropriate) of all documents, instruments, and agreements that the Purchaser or its counsel reasonably may request in connection with the consummation of such transactions. All consents of any Person necessary to the consummation of the transactions contemplated by this Agreement will have been received, be in full force and effect, and not be subject to any onerous condition. 5.07 Reservation of Common Stock. The Purchaser will have received evidence satisfactory to the Purchaser that the Company has reserved a sufficient number of shares of Common Stock for the Purchaser to convert the Series B Preferred Stock and/or exercise the Warrants. 5.08 Expenses. The Company shall pay the reasonable fees and expenses of Purchasers incurred in connection with their review of the Company, the preparation of this Agreement (including exhibits hereto), and the closing of the transactions contemplated hereby. 5.09 Operating Plan. As of the Second Restatement Closing Date, the Company shall have prepared a 5-year operating plan and projections in form and substance satisfactory to the Purchasers. 5.10 Board of Directors. The Company's Board of Directors as of the Second Restatement Closing Date shall consist of Jamie Blech, Martin Kandl, Daniel F. Klein, James D. Lumsden, Stanley Nice, John Bamberger, Christopher Corbett, Chuck Schaeffer and John DeFina.. 5.11 Compliance Certificate. There shall have been delivered to the Purchasers a certificate, dated as of the Closing, signed by the Company's Chairman or President, certifying that the conditions specified in Sections 5.02, 5.03, 5.05, 5.06 (but only the last sentence thereof), 5.07 and 5.10 have been fulfilled. 5.12 Secretary's Certificate. There shall have been delivered to the Purchasers a certificate, dated as of the Closing, signed by the Company's Secretary or an Assistant Secretary and in form and substance satisfactory to the Purchasers, that shall certify (i) the names of its officers authorized to sign this Agreement, the certificates for purchased shares and warrants and the other documents, instruments or certificates to be delivered pursuant to this Agreement by the Company or any of its officers, together with true signatures of such officers; (ii) that the copy of the certificate of incorporation (including any amendments) attached thereto is true, correct and complete; (iii) that the copy of the Bylaws attached thereto is true, correct and complete; (iv) that the copy of Board of Directors' resolutions attached thereto evidencing the approval of this Agreement, the issuance of the Preferred Shares on the Second Restatement Closing Date and the other matters contemplated hereby was duly adopted and is in full force and effect. 5.13 Certificates of Good Standing. There shall have been delivered to the Purchasers Certificates of the Secretary of State of the States of Delaware and New Jersey, and the Maryland State Department of Assessments & Taxation, as to the good standing of the Company as of a recent date. Article VI Miscellaneous 6.01 Indemnification. In addition to any other rights or remedies to which the Purchaser and the Holders may be entitled, the Company and each Stockholder (solely with respect to the representations and warranties made by him) severally and not jointly agree to and will indemnify and hold harmless the Purchaser, the Holders, and their Affiliates and their successors, assigns, officers, directors, managers, employees, attorneys, and agents (individually and collectively, an "Indemnified Party") from and against any and all losses, claims, obligations, liabilities, deficiencies, penalties, causes of action, damages, costs, and expenses (including, without limitation, costs of investigation and defense, attorneys' fees, and expenses), including, without limitation, those arising out of the contributory negligence of any Indemnified Party, that the Indemnified Party may suffer, incur, or be responsible for, arising or resulting from, to the extent applicable, any misrepresentation, breach of warranty, or nonfulfillment of any covenant or agreement on the part of the Company or the Stockholder (solely with respect to the representations and warranties made by him) under this Agreement, the Stockholder Agreement, or under any other agreement to which the Company or the Stockholder is a party in connection with this transaction, or from any misrepresentation in or omission from any certificate or other instrument furnished or to be furnished to the Purchaser or the Holders under this Agreement. 6.02 Default. It is agreed that a violation by any party of the terms of this Agreement cannot be adequately measured or compensated in money damages, and that any breach or threatened breach of this Agreement by a party to this Agreement would do irreparable injury to the nondefaulting party. It is, therefore, agreed that in the event of any breach or threatened breach by a party to this Agreement of the terms and conditions set forth in this Agreement, the nondefaulting party will be entitled, in addition to any and all other rights and remedies that it may have in law or in equity, to apply for and obtain injunctive relief requiring the defaulting party to be restrained from any such breach or threatened breach or to refrain from a continuation of any actual breach. 6.03 Integration. This Agreement, the Warrants, the Preferred Shares, the Stockholder Agreement, and the Company's Certificate of Incorporation, as amended, constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and supersede all previous written, and all previous or contemporaneous oral, negotiations, understandings, arrangements, and agreements. This Agreement may not be amended or supplemented except by a writing signed by Company, the Stockholder, and each Holder. 6.04 Headings. The headings in this Agreement are for convenience and reference only and are not part of the substance of this Agreement. References in this Agreement to Sections and Articles are references to the Sections and Articles of this Agreement unless otherwise specified. 6.05 Severability. The parties to this Agreement expressly agree that it is not the intention of any of them to violate any public policy, statutory or common law rules, regulations, or decisions of any governmental or regulatory body. If any provision of this Agreement is judicially or administratively interpreted or construed as being in violation of any such policy, rule, regulation, or decision, the provision, section, sentence, word, clause, or combination thereof causing such violation will be inoperative (and in lieu thereof there will be inserted such provision, sentence, word, clause, or combination thereof as may be valid and consistent with the intent of the parties under this Agreement) and the remainder of this Agreement, as amended, will remain binding upon the parties, unless the inoperative provision would cause enforcement of the remainder of this Agreement to be inequitable under the circumstances. 6.06 Notices. Whenever it is provided herein that any notice, demand, request, consent, approval, declaration, or other communication be given to or served upon any of the parties by another, such notice, demand, request, consent, approval, declaration, or other communication will be in writing and addressed to the party to be notified as set forth below. Notices shall be deemed to have been validly served, given or delivered (and "the date of such notice" or words of similar effect shall mean the date) five (5) days after deposit in the United States mails, certified mail, return receipt requested, with proper postage prepaid, or upon actual receipt thereof with written acknowledgment of receipt (whether by noncertified mail telecopy, telegram, facsimile, express delivery, hand delivery or otherwise), whichever is earlier. If to Creditanstalt, at: Address of Creditanstalt beneath the name of Creditanstalt on the signature pages of this Agreement with courtesy copies to: Troutman Sanders LLP NationsBank Plaza, Suite 5200 600 Peachtree Street, N.E. Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster Facsimile: (404) 885-3995 If to FF-ITP, at: Address of FF-ITP beneath the name of FF-ITP on the signature pages of this Agreement with courtesy copies to: Wyrick Robbins Yates & Ponton LLP 4101 Lake Boone Trail, Suite 300 Raleigh, North Carolina 27607-7506 Attn: James M. Yates, Jr., Esquire Facsimile: (919) 781-4865 If to the Company, at: IT Partners, Inc. 9881 Broken Land Parkway, Suite 102 Columbia, Maryland 21046 Attn: President Facsimile: (410) 309-9801 with courtesy copies to: Swidler & Berlin 3000 K Street Washington, D.C. 20007 Attn: Kenneth I. Schoner, Esquire Andrew M. Ray, Esquire Facsimile: (202) 424-7643 If to Indosuez, at: Indosuez IT Partners 1211 6th Street, 7th Floor New York, New York 10036 Attn: Michael Arougheti Fax: (212) 278-2254 If to Wachovia, at: Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA423 Atlanta, Georgia 30303 Attn: Senior Vice President/ITP Fax: (404) 332-1455 with courtesy copies to: Wachovia Capital Associates, Inc. 191 Peachtree St., N.E. Mailcode GA715 Atlanta, Georgia 30303 Attn: Legal Department/WCA/ITP Fax: (404) 332-1455 If to the Stockholder: Address of such Stockholder beneath his/her name on the signature pages of this Agreement or to such other address as each party may designate for itself by like notice. Notice to any Holder other than the Purchaser will be delivered as set forth above to the address shown on the stock transfer books of the Company or the Warrant Register unless such Holder has advised the Company in writing of a different address to which notices are to be sent under this Agreement. Failure or delay in delivering courtesy copies of any notice, demand, request, consent, approval, declaration, or other communication to the persons designated above to receive copies of the actual notice will in no way adversely affect the effectiveness of such notice, demand, request, consent, approval, declaration, or other communication. No notice, demand, request, consent, approval, declaration or other communication will be deemed to have been given or received unless and until it sets forth all items of information required to be set forth therein pursuant to the terms of this Agreement. 6.07 Successors. This Agreement will be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided, however, that no sale, assignment or other transfer by any party to this Agreement of any of its Capital Stock or rights hereunder to another Person will be valid and effective unless and until the transferee or assignee first agrees in writing to be bound by the terms and conditions of this Agreement and the Stockholders Agreement and the agreements and instruments related hereto and thereto, in a form and substance reasonably satisfactory to the Company. 6.08 Remedies. The failure of any party to enforce any right or remedy under this Agreement, or promptly to enforce any such right or remedy, will not constitute a waiver thereof, nor give rise to any estoppel against such party, nor excuse any other party from its obligations under this Agreement. Any waiver of any such right or remedy by any party must be in writing and signed by the party against which such waiver is sought to be enforced. 6.09 Survival. All warranties, representations, and covenants made by any party in this Agreement or in any certificate or other instrument delivered by such party or on its behalf under this Agreement will be considered to have been relied upon by the party to which it is delivered and will survive the Original Closing Date, the First Amendment Closing Date, the Second Amendment Closing Date, the Third Amendment Closing, the First Restatement Closing Date, and the Second Restatement Closing Date, as the case may be, regardless of any investigation made by such party or on its behalf. All statements in any such certificate or other instrument will constitute warranties and representations under this Agreement. 6.10 Fees. Any and all fees, costs, and expenses, of whatever kind and nature, including attorneys' fees and expenses, incurred by the Holders in connection with the defense or prosecution of any actions or proceedings arising out of or in connection with this Agreement will be borne and paid by the Company within ten (10) days of demand by the Holders. 6.11 Counterparts. This Agreement may be executed in any number of counterparts, which will individually and collectively constitute one agreement. 6.12 Other Business. It is understood and accepted that the Purchaser, the Holders, and their Affiliates have interests in other business ventures that may be in conflict with the activities of the Company and that nothing in this Agreement will limit the current or future business activities of such parties whether or not such activities are competitive with those of the Company. The Company and the Stockholder agree that all business opportunities that may be available to such parties in any field substantially related to the business of the Company will be pursued exclusively through the Company. 6.13 Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. 6.14 Duties Among Holders. Each Holder agrees that no other Holder will by virtue of this Agreement be under any fiduciary or other duty to give or withhold any consent or approval under this Agreement or to take any other action or omit to take any action under this Agreement, and that each other Holder may act or refrain from acting under this Agreement as such other Holder may, in its discretion, elect. 6.15 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.15 WITH ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF OR THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER TO PURCHASE THE WARRANTS AND PREFERRED SHARES FROM THE COMPANY. 6.16 Amendment. This Agreement shall not be modified or amended except by a writing signed by (a) the Purchasers and/or Stockholders holding at least a majority of the outstanding Series A Preferred Stock and (b) the Purchasers holding at least a majority of the Series B Preferred Stock (or if converted, Conversion Shares) issued or issuable under this Agreement. All of the parties hereto agree that such modification or amendment shall be binding upon and is hereby consented to by all parties to this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. COMPANY: IT PARTNERS, INC. BY: /s/ Daniel J. Klein Daniel J. Klein Chairman of the Board 9881 Broken Land Parkway, Suite 102 Columbia, Maryland 21046 Attn: President Fax: (310) 589-5473 CREDITANSTALT: CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer Robert M. Biringer Executive Vice President By: /s/ Carl Drake Carl Drake Address: Two Greenwich Plaza 4th Floor Greenwich, CT 06830 Attn: Lisa Bruno Fax: (203) 861-6594 with a copy to: Two Ravinia Drive Suite 1680 Atlanta, GA 30346 Attn: Carl Drake Fax: (770) 390-1851 OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 200,000 Shares of Series A Preferred Stock 222,222 Shares of Series B Preferred Stock None Shares of Common Stock 257,862 Shares issuable under Warrant A* 120,335 Shares issuable under Warrant C* 78,710 Shares issuable under Warrant D* 188,680 Shares issuable under Warrant E* * Prior to any adjustments to such number of shares as set forth in Section 2.08 of this Agreement. FF-ITP: FF-ITP, L.P. BY: FSFC Associates, L.P., its General Partner BY: Franklin Capital, L.L.C., its General Partner BY: /s/ James D. Lumsden James D. Lumsden, Manager OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 110,000 Shares of Series A Preferred Stock 29,516 Shares of Common Stock 515,724 Shares issuable under Warrant B* * Prior to any adjustments to such number of shares as set forth in Section 2.08 of this Agreement. INDOSUEZ: INDOSUEZ IT PARTNERS By: Indosuez CM II, Inc. Managing General Partner By: /s/Les Lieberman TITLE: Executive Vice President BY:Les Lieberman TITLE: Executive Vice President OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 431,965 Shares of Series B Preferred Stock WACHOVIA: WACHOVIA CAPITAL ASSOCIATES, INC. BY:/s/ TITLE: OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 647,948 Shares of Series B Preferred Stock STOCKHOLDER /s/ Daniel J. Klein Daniel J. Klein OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 550,101 Shares of Common Stock 10,900 Shares of Series A Preferred Stock None Common Stock Options Jamie E. Blech /s/ Jamie E. Blech OWNED ON THE SECOND RESTATEMENT CLOSING DATE: 550,101 Shares of Common Stock 10,900 Shares of Series A Preferred Stock None Common Stock Options FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "First Amendment to Second Restatement") is made and entered to as of , 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT CORPORATE FINANCE, INC., having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 (together with any successor, assignee or transferee, "Creditanstalt"), FF-ITP, L.P., a Delaware limited partnership ("FF-ITP"), INDOSUEZ IT PARTNERS, having offices at 1211 Avenue of the Americas, New York, New York 10036-8701 (together with any successor, assignee or transferee, "Indosuez I"), INDOSUEZ IT PARTNERS II, having offices at 1211 Avenue of the Americas, New York, New York 10036-8701 (together with any successor, assignee or transferee, "Indosuez II"), WACHOVIA CAPITAL ASSOCIATES, INC., having offices at 191 Peachtree Street, N.E., 26th Floor, Atlanta, Georgia 30303 (together with any successor, assignee or transferee,"Wachovia", which, together with Creditanstalt, FF-ITP Indosuez I and Indosuez II are individually and collectively, as the context requires, referred to herein as the "Purchaser"), and each of the STOCKHOLDERS named on the signature pages hereto (individually and collectively, as the context requires, the "Stockholder"). W I T N E S S E T H: WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by the First Amendment to Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further amended by the Second Amendment to Preferred Stock and Warrant Purchase Agreement dated October 27, 1997, as further amended by the Third Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, and as further amended by the Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated December 16, 1997 (as amended, the "Original Purchase Agreement") by and among the parties thereto, (i) Creditanstalt purchased an aggregate of 100,000 shares of the Company's Series A Preferred Stock and warrants (the "Equity Warrants") for the purchase of up to 456,907 shares (subject to adjustment as set forth in Section 2.08 of the Original Purchase Agreement) of either the Company's common stock, $.01 par value per share ("Common Stock"), or the Company's Series B Preferred Stock, $.01 par value per share; and (ii) FF-ITP purchased 110,000 shares of the Company's Series A Preferred Stock, 29,516 shares of Common Stock, and Equity Warrants for the purchase of up to 515,724 shares (subject to adjustment as set forth in Section 2.08 of the Original Purchase Agreement) of the Company's Common Stock; and WHEREAS, the Company and the Stockholders amended and restated the Original Purchase Agreement pursuant to that certain Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of January 8, 1998 (the "First Restated Purchase Agreement") pursuant to which Creditanstalt acquired (a) 100,000 shares of Series A Preferred Stock with Equity Warrants for the purchase of 188,680 shares of Common Stock or Series B Preferred Stock, and (b) 222,222 shares of Series B Preferred Stock; and WHEREAS, the Company and the Stockholders amended and restated the First Restated Purchase Agreement, pursuant to that certain Second Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of March 31, 1998 (the "Second Restated Purchase Agreement") pursuant to which Indosuez I acquired (a) 431,965 shares of Series B Preferred Stock, and (b) Wachovia acquired 647,948 shares of Series B Preferred Stock; and WHEREAS, the Company desires that Indosuez II make the following equity investment as of the First Amendment to Second Restatement Closing Date (as defined herein): Indosuez II will purchase 85,313 shares of Series B Preferred Stock at an aggregate purchase price of $395,000 ($4.63 per share), (the "Additional Equity Investment"); and WHEREAS, in connection with such proposed purchase of shares of Series B Preferred Stock the parties hereto wish to amend the Second Restated Purchase Agreement in order to provide for the Additional Equity Investment and make certain other changes set forth herein; NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Purchasers, the Stockholders, and the Company, intending to be legally bound, agree as follows: Section 1. Definitions. As used in this First Amendment to Second Restatement, unless otherwise defined herein, terms defined in the Second Restated Purchase Agreement shall have the meaning set forth therein when used herein. Section 2. Definition of "First Amendment to Second Restatement Closing Date". Article I of the Second Restated Purchase Agreement is hereby amended by adding following the definition of "First Amendment Closing Date" a new definition of "First Amendment to Second Restatement Closing Date" as follows: First Amendment to Second Restatement Closing Date: , 1998. Section 3. Amendment of Definition of "Closing". The term "Closing" as set forth in Article I of the Second Restated Purchase Agreement, is hereby deleted in its entirety and the following definition is substituted in lieu thereof: Closing. This term refers to the purchase and sale of the Series B Preferred Stock effective as of the Second Restated Purchase Agreement or the First Amendment to Second Restatement Closing Date, as the case may be. Section 4. Amendment of Definition of "Permitted Stock". The term "Permitted Stock," as set forth in Article I of the Second Restated Purchase Agreement, is hereby deleted in its entirety and the following definition is substituted in lieu thereof: Permitted Stock. This term shall mean (a) Warrant Shares, and shares of the Company's Capital Stock issuable upon exercise thereof; (b) Capital Stock of the Company issued as a dividend on shares of the Company's Capital Stock or as a result of a stock split with respect thereto; (c) options and warrants outstanding (or that the Company's Board of Directors has approved for issuance to specific employees) as of the Original Closing Date to purchase the Company's Capital Stock, and shares of the Company's Capital Stock issuable upon exercise thereof; (d) the Business Combination Options, and shares of the Company's Capital Stock issuable upon exercise thereof; (e) options to be granted after the Original Closing Date to employees of the Company and its Subsidiaries to purchase up to 335,286 shares of Common Stock of the Company, at an exercise price not less than the Fair Market Value at the time of issuance of such options, and shares of the Company's Capital Stock issuable upon exercise thereof; (f) shares of Series A Preferred Stock issuable pursuant to the Original Purchase Agreement or the First Restated Purchase Agreement; (g) shares of Series B Preferred Stock issuable pursuant to the First Restated Purchase Agreement, the Second Restated Purchase Agreement or this First Amendment to Second Restatement; (h) shares of Common Stock issuable upon conversion of Series B Preferred Stock (i) 29,516 shares of Common Stock issuable to FF-ITP on the Third Amendment Closing Date; (j) 103,093 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $200,000; (k) 29,516 shares of Common Stock issuable to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $100,000; (l) 14,758 shares of Common Stock issuable to Martin and Haeyoung Kandl (jointly) at an aggregate purchase price of $50,000; (m) 1,001 shares of Common Stock issuable to Thomas Gardner at an aggregate purchase price of $3,390; (n) options to be granted to FBD Consulting, Inc. ("FBD") to purchase up to 2400 shares of Common Stock of the Company, at an exercise price not less than $5.60 per share, and shares of the Company's Capital Stock issuable upon exercise thereof; and (o) options to be granted to Doig, Elliott, Schur, Inc. ("DES") to purchase up to 18,304 shares of Common Stock of the Company, at an exercise price not less than $5.60 per share, and shares of the Company's Capital Stock issuable upon exercise thereof. The limits in clauses (e), (i) (j), (k), (l) and (m) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. Section 5. The Warrants and the Preferred Shares. Section 2.01 of the Second Restated Purchase Agreement is hereby amended by adding following section (h)(i) the following: (i) On the First Amendment to Second Restatement Closing Date, Indosuez II agrees to purchase from the Company at the purchase price set forth below, and the Company agrees to issue to Indosuez II, all in accordance with the terms and conditions of this Agreement: (i) 85,313 shares of Series B Preferred Stock at a purchase price of $395,000, or $4.63 per share, having the rights, restrictions, privileges, and preferences set forth in the Certificate. Section 6. The Warrants and the Preferred Shares. Section 2.01 of the Second Restated Purchase Agreement is hereby further amended by deleting the first sentence of the last paragraph thereof and substituting in lieu thereof the following: On the First Amendment to Second Restatement Closing Date, the Company will deliver to Indosuez II a certificate evidencing and representing the shares of Series B Preferred Stock, issued to such Purchaser. The Company has duly authorized the Series A Preferred Stock and Series B Preferred Stock purchased and sold pursuant to the terms of this Agreement by duly filing the Certificate with the Secretary of State of the State of Delaware. The shares of Series A Preferred Stock and the shares of Series B Preferred Stock subject to the terms of this Agreement are sometimes referred to in this Agreement as the "Preferred Shares." Section 7. Legend. Section 2.02 of the Second Restated Purchase Agreement is hereby amended by deleting the first sentence thereof in its entirety and substituting in lieu thereof the following: The Company will deliver to the Purchaser on the First Amendment to Second Restatement Closing Date, one or more certificates representing the Series B Preferred Stock, purchased by such Purchaser, in such denominations as such Purchaser requests. Section 8. Representations and Warranties of the Company. All of the representations and warranties of the Company found in Section 3.01 of the Second Restated Purchase Agreement are true and accurate as of the First Amendment to Second Restated Purchase Agreement Closing Date with the exception of subsection (d) which shall read as follows: (d) As of the First Amendment to Second Restatement Closing Date and giving effect to all issuances on such date of shares of Common Stock, Series A Preferred Stock, and Series B Preferred Stock, the authorized capital stock of the Company consists of (i) 20,000,000 shares of Common Stock of which 7,693,526 shares will be issued and outstanding upon the Closing; and (ii) 6,000,000 shares of Preferred Stock, of which 600,000 shares have been designated Series A Preferred Stock, 347,230 of which will be issued and outstanding upon the Closing; 5,000,000 shares have been designated Series B Preferred Stock, 1,387,448 of which will be issued and outstanding upon the Closing; and the Company has (and will have as of the Closing) no other shares outstanding. An aggregate of 4,000,000 shares of Common Stock are reserved for issuance on the exercise of the Warrants and the Loan Warrants and conversion of the Series B Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are reserved for issuance on exercise of the Warrants and the Loan Warrants. An aggregate of 351,029 shares of Common Stock are reserved for issuance to employees of the Company and of Subsidiaries of the Company. All of the issued and outstanding shares of Common Stock are, and upon issuance and payment therefor in accordance with the terms of this Agreement, all of the outstanding Series A Preferred Stock and Series B Preferred Stock will be, validly issued, fully paid and nonassessable. The Common Stock, Series A Preferred Stock and Series B Preferred Stock have been offered, issued, sold, and delivered by the Company free from preemptive rights, rights of first refusal, antidilution rights, cumulative voting rights or similar rights (except as otherwise provided in this Agreement or in the powers, designations, rights and preferences of the Preferred Stock contained in the Certificate) and in compliance with applicable federal and state securities laws. Except pursuant to this Agreement and the Certificate and except for the Permitted Stock the Company is not obligated to issue or sell any Capital Stock and, except for this Agreement and the Stockholder Agreement, neither the Company nor the Stockholder is party to, or otherwise bound by, any agreement affecting the voting of any Capital Stock. Except for the Stockholder Agreement and the Loan Warrant Agreement, the Company is not, nor will it be, a party to, or otherwise bound by, any agreement obligating it to register any of its Capital Stock. Section 9. Representations and Warranties of the Purchaser. All of the representations and warranties of the Purchaser found in Section 3.02 of the Second Restated Purchase Agreement are true and accurate as of the First Amendment to Second Restatement Closing Date. In addition, the Purchaser represents and warrants to the Company the following: A majority of the partners of the general partnership are officers, directors, employees or Affiliates of a Regulated Holder. Section 10. Notices. Notice shall be provided in accordance with Section 6.06 of the Second Restated Purchase Agreement and if to Indosuez II, notice is to be given according to the name and address as set forth on the signature page to this First Amendment to Second Restatement. Section 11. Survival. Section 6.09 of the Second Restated Purchase Agreement is hereby deleted in its entirety and substituting in lieu thereof the following: 6.09 Survival. All warranties, representations, and covenants made by any party in this Agreement or in any certificate or other instrument delivered by such party or on its behalf under this Agreement will be considered to have been relied upon by the party to which it is delivered and will survive the Original Closing Date, the First Amendment Closing Date, the Second Amendment Closing Date, the Third Amendment Closing, the First Restatement Closing Date, the Second Restatement Closing Date, the First Amendment to Second Restatement Closing Date, as the case may be, regardless of any investigation made by such party or on its behalf. All statements in any such certificate or other instrument will constitute warranties and representations under this Agreement. Section 12. Expenses. The Company shall pay the reasonable fees and expenses of Purchasers incurred in connection with the negotiation, preparation, execution and delivery of this First Amendment to Second Restatement. Section 13. Limitation of Amendment. Except as expressly set forth herein, this First Amendment to Second Restatement shall not be deemed to waive, amend or modify any term or condition of the Second Restated Purchase Agreement, each of which is hereby ratified and reaffirmed and shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. Section 14. Counterparts. This First Amendment to Second Restatement may be executed in any number of counterparts and any party hereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which, when taken together, will be deemed but one and the same agreement. Section 15. Choice of Law. THIS FIRST AMENDMENT TO SECOND RESTATEMENT WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. Section 16. Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 16 WITH ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS FIRST AMENDMENT TO SECOND RESTATEMENT OR ANY DOCUMENTS ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE COMPANY, EACH PURCHASER AND EACH STOCKHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF OR THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER TO PURCHASE THE WARRANTS AND PREFERRED SHARES FROM THE COMPANY. Section 17. Amendment. This First Amendment to Second Restatement shall not be modified or amended except by a writing signed by (a) the Purchaser and/or Stockholders holding at least a majority of the outstanding Series A Preferred Stock and (b) the Purchasers holding at least a majority of the Series B Preferred Stock (or if converted, Conversion Shares) issued or issuable under this Agreement. All of the parties hereto agree that such modification or amendment shall be binding upon and is hereby consented to by all parties to this Agreement. [SIGNATURE PAGES FOLLOW] IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. COMPANY: IT PARTNERS, INC. By: /s/ Daniel J. Klein -------------------- Daniel J. Klein Chairman of the Board 9881 Broken Land Parkway, Suite 102 Columbia, Maryland 21046 Attn: President Fax: (410) 309-9801 CREDITANSTALT: CREDITANSTALT CORPORATE FINANCE, INC. By:/s/ Robert M. Biringer ------------------------- Robert M. Biringer Executive Vice President By: /s/ Carl Drake ---------------------------- Carl Drake Address: Two Greenwich Plaza 4th Floor Greenwich, CT 06830 Attn: Lisa Bruno Fax: (203) 861-6594 with a copy to: Two Ravinia Drive Suite 1680 Atlanta, GA 30346 Attn: Carl Drake Fax: (770) 390-1851 OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 207,569 Shares of Series A Preferred Stock 222,222 Shares of Series B Preferred Stock None Shares of Common Stock 273,647 Shares issuable under Warrant A 127,701 Shares issuable under Warrant C 81,891 Shares issuable under Warrant D 192,454 Shares issuable under Warrant E FF-ITP: FF-ITP, L.P. By: FSFC Associates, L.P., its General Partner By: Franklin Capital, L.L.C., its General Partner By: /s/ James D. Lumsden ------------------------ James D. Lumsden, Manager OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 116,525 Shares of Series A Preferred Stock 29,516 Shares of Common Stock 547,292 Shares issuable under Warrant B INDOSUEZ I: INDOSUEZ IT PARTNERS By: Indosuez CM II, Inc. Managing General Partner By:/s/ Les Lieberman Title: Executive Vice President By: Les Lieberman Title: Executive Vice President OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 431,965 Shares of Series B Preferred Stock INDOSUEZ II: INDOSUEZ IT PARTNERS II By:/s/ Les Lieberman ------------------ Les Lieberman Managing General Partner OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 85,313 Shares of Series B Preferred Stock WACHOVIA: WACHOVIA CAPITAL ASSOCIATES, INC. By: /s/ Title: OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 647,948 Shares of Series B Preferred Stock STOCKHOLDER: /s/ Daniel J. Klein Daniel J. Klein OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 550,101 Shares of Common Stock 11,568 Shares of Series A Preferred Stock None Common Stock Options /s/ Jamie E. Blech Jamie E. Blech OWNED ON THE FIRST AMENDMENT TO SECOND RESTATEMENT CLOSING DATE: 550,101 Shares of Common Stock 11,568 Shares of Series A Preferred Stock None Common Stock Options SECOND AMENDMENT TO SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Second Amendment to Second Restatement") is made and entered into as of this 27th day of July, 1998 by and among IT PARTNERS, INC., a Delaware corporation (the "Company"), CREDITANSTALT CORPORATE FINANCE, INC., having offices at Two Greenwich Plaza, Greenwich, Connecticut 06830 ("Creditanstalt"), FF-ITP, L.P., a Delaware limited partnership ("FF-ITP"), INDOSUEZ IT PARTNERS, having offices at 1211 Avenue of the Americas, New York, New York 10036-8701 (together with any successor, assignee or transferee, "Indosuez I"), INDOSUEZ IT PARNERS II, , having offices at 1211 Avenue of the Americas, New York, New York 10036-8701 (together with any successor, assignee or transferee, "Indosuez II"), WACHOVIA CAPITAL ASSOCIATES, INC., having offices at 191 Peachtree Street, N.E., 26th Floor, Atlanta, Georgia 30303 (together with any successor, assignee or transferee, "Wachovia"), and each of the STOCKHOLDERS named on the signature pages hereto (individually and collectively, as the context requires, a "Stockholder"). WHEREAS, pursuant to a certain Preferred Stock and Warrant Purchase Agreement, dated as of May 30, 1997, as amended by the First Amendment to Preferred Stock and Warrant Purchase Agreement dated July 11, 1997, as further amended by the Second Amendment to Preferred Stock and Warrant Purchase Agreement dated October 27, 1997, as further amended by the Third Amendment to Preferred Stock and Warrant Purchase Agreement dated October 31, 1997, and as further amended by the Fourth Amendment to Preferred Stock and Warrant Purchase Agreement dated December 16, 1997 (as amended, the "Original Purchase Agreement") by and among the parties thereto, (i) Creditanstalt purchased an aggregate of 100,000 shares of the Company's Series A Preferred Stock and warrants (the "Equity Warrants") for the purchase of up to 456,907 shares of either the Company's common stock, $.01 par value per share ("Common Stock"), or the Company's Series B Preferred Stock, $.01 par value per share; and (ii) FF-ITP purchased 110,000 shares of the Company's Series A Preferred Stock, 29,516 shares of Common Stock, and Equity Warrants for the purchase of up to 515,724 shares of the Company's Common Stock; and WHEREAS, the Company and certain of the Stockholders amended and retated the Original Purchase Agreement pursuant to that certain Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of January 8, 1998 (the "First Restated Purchase Agreement") pursuant to which Creditanstalt acquired (i) 100,000 shares of Series A Preferred Stock with Equity Warrants for the purchase of 188,680 shares of Common Stock or Series B Preferred Stock, and (ii) 222,222 shares of Series B Preferred Stock; and WHEREAS, the Company and the Stockholders amended and restated the First Restated Purchase Agreement, pursuant to that certain Second Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of March 31, 1998, as amended by the First Amendment to the Second Amended and Restated Preferred Stock and Warrant Purchase Agreement, dated as of May __, 1998 (as amended, the "Second Restated Purchase Agreement") pursuant to which (i) Indosuez acquired 431,965 shares of Series B Preferred Stock, (ii) Wachovia acquired 647,948 shares of Series B Preferred Stock, and (c) Indosuez II acquired 85,313 shares of Series B Preferred Stock; and WHEREAS, the Company desires to enter into a certain 12% Series C Senior Redeemable Preferred Stock Purchase Agreement, dated as of the date hereof (the "Series C Purchase Agreement"), among the Company and FBR Business Development Capital ("FBR"), pursuant to which FBR will purchase an aggregate of 700 shares of the Company's 12% Series C Senior Redeemable Preferred Stock (the "Series C Preferred Stock"); and WHEREAS, the Company intends to enter into a stock purchase agreement with Wachovia pursuant to which Wachovia may purchase up to 300 shares of Series C Preferred Stock; and WHEREAS, in connection with the execution, delivery and performance of the Series C Purchase Agreement and the issuance of the Series C Preferred Stock by the Company to FBR and Wachovia, the Company and the Stockholders have agreed to amend the Second Restated Purchase Agreement and to waive certain provisions thereunder in order to provide for the issuance of the Series C Preferred Stock and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock; NOW, THEREFORE, in consideration of the premises, the terms and conditions herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Section 1. Definitions. As used in this Second Amendment to Second Restatement, unless otherwise defined herein, terms defined in the Second Restated Purchase Agreement shall have the meaning set forth therein when used herein. Section 2. Capital Stock. The term "Capital Stock," as set forth in Section 1 of the Second Restated Purchase Agreement is hereby deleted in its entirety and the following definition is substituted in lieu thereof: Capital Stock. As to any Person, its common stock and any other capital stock of such Person authorized from time to time, and any other shares, options, interests, participations, or other equivalents (however designated) of or in such Person, whether voting or nonvoting, including, without limitation, common stock, options, warrants, preferred stock (including the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock), phantom stock, stock appreciation rights, convertible notes or debentures, stock purchase rights, and all agreements, instruments, documents, and securities convertible, exercisable, or exchangeable, in whole or in part, into any one or more of the foregoing. Section 3. Permitted Stock. The term "Permitted Stock," as set forth in Section 1 of the Second Restated Purchase Agreement is hereby deleted in its entirety and the following definition is substituted in lieu thereof: Permitted Stock. This term shall mean (a) Warrant Shares, and shares of the Company's Capital Stock issuable upon exercise thereof; (b) Capital Stock of the Company issued as a dividend on shares of the Company's Capital Stock or as a result of a stock split with respect thereto; (c) options and warrants outstanding (or that the Company's Board of Directors has approved for issuance to specific employees) as of the date hereof to purchase the Company's Capital Stock, and shares of the Company's Capital Stock issuable upon exercise thereof; (d) the Business Combination Options, and shares of the Company's Capital Stock issuable upon exercise thereof; (e) options to be granted after the Original Closing Date to employees of the Company and its Subsidiaries to purchase up to 335,286 shares of Common Stock of the Company, at an exercise price not less than the Fair Market Value at the time of issuance of such options, and shares of the Company's Capital Stock issuable upon exercise thereof; (f) shares of Series A Preferred Stock issued or issuable pursuant to the Original Purchase Agreement or the First Restated Purchase Agreement; (g) shares of Series B Preferred Stock issued or issuable pursuant to the First Restated Purchase Agreement or the Second Restated Purchase Agreement; (h) shares of Common Stock issuable upon conversion of Series B Preferred Stock (i) 29,516 shares of Common Stock issued to FF-ITP on the Third Amendment Closing Date; (j) 103,093 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $200,000; (k) 29,516 shares of Common Stock issued to Christopher A. and Merrie Corbett (jointly) at an aggregate purchase price of $100,000; (l) 14,758 shares of Common Stock issued to Martin and Haeyoung Kandl (jointly) at an aggregate purchase price of $50,000; (m) 1,001 shares of Common Stock issued to Thomas Gardner at an aggregate purchase price of $3,390; (n) options granted to FBD Consulting, Inc. ("FBD") to purchase up to 2,400 shares of Common Stock of the Company, at an exercise price of not less than $5.60 per share, and shares of the Company's Capital Stock issuable upon exercise thereof; (o) options granted to Doig, Elliott, Schur, Inc. ("DES") to purchase up to 18,304 shares of Common Stock of the Company, at an exercise price of $5.60 per share, and shares of the Company's Capital Stock issuable upon excercise thereof; (p) up to 700 shares of Series C Preferred Stock issued to FBR Business Development Capital pursuant to the Series C Purchase Agreement; (q) up to 300 shares of Series C Preferred Stock to be issued to Wachovia; and (r) shares of the Company's Capital Stock issuable upon redemption of the Series C Preferred Stock. The limits in clauses (e), (i) (j), (k), (l) and (m) shall be proportionately adjusted for dividends and other distributions payable in and for subdivisions and combinations of shares of Common Stock. Section 4. Series C Preferred Stock. Section 1 of the Second Restated Purchase Agreement is hereby amended by adding following the definition of "Series B Preferred Stock" a new definition of "Series C Preferred Stock" as follows: Series C Preferred Stock. 12% Series C Senior Redeemable Preferred Stock, $.01 par value, of the Company having the rights, restrictions, privileges and preferences of the series of preferred stock designated as "12% Series C Senior Redeemable Preferred Stock" set forth in the Certificate. Section 5. Series C Purchase Agreement. Section 1 of the Second Restated Purchase Agreement is hereby amended by adding following the definition of "Series C Preferred Stock" a new definition of "Series C Purchase Agreement" as follows: Series C Purchase Agreement. This term shall mean the 12% Series C Senior Redeemable Preferred Stock Purchase Agreement, dated as of July 27, 1998, among Company and FBR Business Development Capital (as such may be amended, restated, supplemented or otherwise modified from time to time). Section 6. Waiver of Rights under Section 2.08(e). In connection with and solely with respect to the execution, delivery and performance of the Series C Purchase Agreement, the issuance of the Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock, each of the Holders hereby waives forever the restrictions under Section 2.08(e) on the Company's ability to issue any Capital Stock other than Common Stock and Common Stock Equivalents. Section 7. Waiver of Certain Notice Requirements. In connection with the execution, delivery and performance of the Series C Purchase Agreement, the issuance of the Series C Preferred Stock and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock, each of the Holders hereby (i) acknowledges that it has received satisfactory notice under the provisions of Section 4.04(a) of the Second Restated Purchase Agreement and (ii) waives forever any right to claim any insufficiency of such notice under the provisions of Section 4.04(a). Section 8. Consent to and Waiver of Certain Actions. Each of FF-ITP and, in the case of subsections 4.06(a), (b), (d), (e), and (p) of the Second Restatement to Purchase Agreement, the holders of the outstanding shares of Series B Preferred Stock (other than a Regulated Holder), hereby (i) consents to the execution, delivery and performance of the Series C Purchase Agreement and the Certificate of Designation, and the transactions contemplated thereby, the issuance of the Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock; and (ii) solely with respect to execution, delivery and performance of the Series C Purchase Agreement, the issuance of the Series C Preferred Stock to FBR and Wachovia and the issuance of Common Stock as a dividend upon redemption of the Series C Preferred Stock, each of the Holders hereby waives forever the following provisions of Section 4.06 of the Second Restated Purchase Agreement: (a) The restrictions under Section 4.06(a) on the Company's ability to amend its certificate of incorporation to provide for the Series C Preferred Stock; (b) The restrictions under Section 4.06(b)(i) on the Company's ability to pay dividends on, or redeem, the Series C Preferred Stock, in each case in accordance with the Certificate of Designation for the Series C Preferred Stock; (c) The restrictions under Section 4.06(b)(ii) (restrictions on the Company's ability to pay any professional consulting or management fees to any shareholder of the Company) with respect to the retention of Friedman, Billings, Ramsey & Co., Inc. as lead underwriter for the initial public offering of the Company; (d) The prohibition under Section 4.06(d) on the issuance of the Series C Preferred Stock or shares of Common Stock issuable as a dividend upon redemption of the Series C Preferred Stock; (e) The requirement under Section 4.06(e) that FBR become a party to the Amended and Restated Stockholder Agreement dated March 31, 1998, as amended, among the Company and the other parties thereto; (f) The restrictions under Section 4.06(g) with respect to the retention of Friedman, Billings, Ramsey & Co., Inc. as lead underwriter for the initial public offering of the Company; (g) The prohibitions under Section 4.06(p) on making the Series C Preferred Stock senior to the Series A Preferred Stock; (h) The prohibitions under Section 4.06(q) on issuances of the Company's equity securities at a price per share of less than Fair Market Value, that may be applicable to the issuance of the Series C Preferred Stock, and the Common Stock issuable as a dividend upon redemption of the Series C Preferred Stock; and (i) The prohibitions under Section 4.06(r) on the Company from obligating itself to agree to take, permit or enter into any of the events described in subsections 4.06(a) through (q). Section 9 Representations and Warranties. The Company hereby represents and warrants to the Stockholders as follows: (a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and authority to conduct its business as presently conducted and as intended to be conducted, has the corporate power and authority to execute and deliver this Second Amendment to Second Restatement, has the corporate power and authority and legal right to own and lease its properties and is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the conduct of its business requires such qualification, except where failure to be so qualified could not be reasonably expected to have a material adverse effect on the business, properties, financial condition or results of operations of the Company and its Subsidiaries taken as a whole. (b) The execution, delivery and performance by the Company of this Second Amendment to Second Restatement have been duly authorized by all necessary corporate action and do not and will not violate, or result in a breach of, or constitute a default under, or require any consent under, or result in the creation of any lien, charge or encumbrance upon the assets of the Company pursuant to, any law, statute, ordinance, rule, regulation, order or decree of any court, governmental body or regulatory authority or administrative agency having jurisdiction over the Company or its Subsidiaries or the Company's Certificate of Incorporation or any contract, mortgage, loan agreement, note, lease or other instrument binding upon the Company or its Subsidiaries or by which their properties are bound. (c) This Second Amendment to Second Restatement has been duly executed and delivered by the Company and constitutes a legal, valid, binding and enforceable obligation of the Company. (d) As of the date hereof, and giving effect to all issuances on such date of shares of Series C Preferred Stock and FBR Warrants, the authorized capital stock of Company consists of (i) 20,000,000 shares of Common Stock of which 8,279,658 shares are issued and outstanding; and (ii) 6,000,000 shares of Preferred Stock, of which 600,000 shares have been designated Series A Preferred Stock, 347,230 of which are issued and outstanding; 5,000,000 shares have been designated Series B Preferred Stock, 1,387,448 of which are issued and outstanding; and _____ shares have been designated Series C Preferred Stock, 700 of which will be issued and outstanding upon the closing of the Series C Purchase Agreement. An aggregate of 4,000,000 shares of Common Stock are reserved for issuance on the exercise of the Warrants and the Loan Warrants and conversion of the Series B Preferred Stock, and 2,000,000 shares of Series B Preferred Stock are reserved for issuance on exercise of the Warrants and the Loan Warrants. As of the date hereof, an aggregate of 1,000,000 shares of Common Stock are reserved for issuance to employees of the Company and of Subsidiaries of the Company. All of the issued and outstanding shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock are, and upon issuance and payment therefor in accordance with the terms of the Series C Purchase Agreement, all of the outstanding Series C Preferred Stock will be, validly issued, fully paid and nonassessable. To the Company's best knowledge, other than the Amended and Restated Stockholder Agreement dated March 31, 1998, as amended (as further amended, restated, supplemented or otherwise modified from time to time), there are no voting agreements, voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Company or any Subsidiary. Section 10. Expenses. The Company agrees to pay, immediately upon demand by Creditanstalt, all costs, expenses, attorneys' fees, and other charges and expenses incurred by Creditanstalt in connection with the negotiation, preparation, execution and delivery of this Second Amendment to Second Restatement and any other instrument, document, agreement or amendment executed in connection with this Second Amendment. Section 11. Limitation of Amendment. Except as expressly set forth herein, this Second Amendment to Second Restatement shall not be deemed to waive, amend or modify any term or condition of the Second Restated Purchase Agreement, each of which is hereby ratified and reaffirmed and shall remain in full force and effect, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. Section 12. Counterparts. This Second Amendment to Second Restatement may be executed in any number of counterparts and any party hereto may execute any counterpart, each of which when executed and delivered will be deemed to be an original and all of which, taken together, will be deemed but one and the same agreement. Section 13. Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF DELAWARE APPLICABLE TO AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Second Restatement under seal as of the date and year first above written. COMPANY: IT PARTNERS, INC. By: /s/ Daniel J. Klein --------------------- Daniel J. Klein, Chief Executive Officer CREDITANSTALT: CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer Robert M. Biringer Executive Vice President By: /s/ John G. Taylor Name: John G. Taylor Title: Senior Associate FF-ITP: FF-ITP, L.P. By: FSFC Associates, L.P., its General Partner By: Franklin Capital, L.L.C., its General Partner By: /s/ James D. Lumsden James D. Lumsden, Manager INDOSUEZ I: INDOSUEZ IT PARTNERS By: Indosuez CM II, Inc. Managing General Partner By:/s/ Title: By:/s/ Title: INDOSUEZ II: INDOSUEZ IT PARTNERS II By:/s/ Les Liemberman Title: Executive Vice President WACHOVIA: WACHOVIA CAPITAL ASSOCIATES, INC. By: Title: STOCKHOLDERS: /s/ Daniel J. Klein Daniel J. Klein /s/ Jamie E. Blech Jamie E. Blech EX-4.5 5 STAN CALL NOTE PROMISSORY NOTE Stanton L. Call $2,876,206.00 Columbia, Maryland 5/13, 1998 --------------- FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to Stanton L. Call (the "Payee") the principal sum of TWO MILLION EIGHT HUNDRED SEVENTY SIX THOUSAND TWO HUNDRED SIX AND 00/100 DOLLARS ($2,876,206.00), together with interest at the rate of eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly commencing August 15, 1998, and payable thereafter on the fifteenth of November, February and May, respectively, through the Maturity Date. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, or (2) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Asset Purchase Agreement between the Maker and the Payee, dated 5/13,1998 (the "Asset Purchase Agreement"), pursuant to which this Note has been issued. The principal amount of this Note will be subject to cancellation and amendment pursuant to Section 2.1(iii)(d) of the Asset Purchase Agreement. If this Note is canceled or amended in accordance with the Asset Purchase Agreement, the Payee, upon demand of Maker, shall within seven (7) days of such demand return this Note to Maker for cancellation and return any excess payment made on this Note to the Maker. Upon determination of the NTM EBITDA, as such term is defined in the Asset Purchase Agreement, this Note shall be convertible into Common Shares of ITP at a conversion price of $5.70 per share. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Amended and Restated Loan and Security Agreement by and between the Maker and the Lenders named therein, dated March 31, 1998, as well as that certain Subordination Agreement executed by the Payee on even date in favor of the Lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time. without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this Note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by the Maker and contained in the Asset Purchase Agreement or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written IT PARTNERS, INC. By: /s/ Jamie E. Blech ---------------------------- Title: President ------------------------- EX-4.6 6 SERVINET NOTE PROMISSORY NOTE "FIRST NOTE" $1,488,500.00 Columbia, Maryland June 10, 1998 FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to Servinet Consulting Group, Inc., a California corporation (the "Payee"), the principal sum of One Million Four Hundred Eighty Eight Thousand Five Hundred and 00/100 Dollars ($1,488,500.00), together with interest at the rate of eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly commencing the fourth quarter of 1998. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, or (2) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Asset Purchase Agreement between the Maker and the Payee, dated June 10, 1998 (the "Asset Purchase Agreement"), pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Amended and Restated Loan and Security Agreement by and between the Maker and the Lenders named therein, dated March 31, 1998, as well as that certain Subordination Agreement executed by the Payee on even date in favor of the Lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this Note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by the Maker and contained in the Asset Purchase Agreement or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS, INC. By: /s/ Jamie Blech ----------------- Title: President EX-4.10 7 STOCK PURCHASE AGREEMENT WITH FBR EXECUTION COPY ---------------------------------------------------------------------------- 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JULY 27, 1998 BY AND BETWEEN IT PARTNERS, INC., as the Company AND FBR BUSINESS DEVELOPMENT CAPITAL as the Purchaser ---------------------------------------------------------------------------- TABLE OF CONTENTS Page SECTION 1 Definitions 1 1.1. Defined Terms 1 1.2. 3 SECTION 2 Authorization and Sale of the Company's Stock 4 2.1. Authorization of Series C Preferred and Common Stock 4 2.2. Sale and Purchase of Series C Preferred 4 2.3. Use of Proceeds 4 SECTION 3 Closing Date; Delivery 4 3.1. Closing Date 4 3.2. Delivery 4 SECTION 4 Representations and Warranties of the Company 5 4.1. Organization, Good Standing and Qualification 5 4.2. Capitalization 5 4.3. Subsidiaries 6 4.4. Partnerships, Joint Ventures 7 4.5. Authorization 7 4.6. Governmental Consents 7 4.7. Conformity with Law; Absence of Litigation 7 4.8. Insurance 8 4.9. Adequacy of Intangible Assets 8 4.10. Compliance with Other Instruments and Legal Requirements 8 4.11. Material Agreements; Action 9 4.12. Registration Rights 9 4.13. Corporate Documents 9 4.14. Real Property 9 4.15. Tangible Personal Property 10 4.16. Environmental Matters 11 4.17. Company SEC Reports and Financial Statements 12 4.18. Changes 13 4.19. Employee Benefit Plans 13 4.20. Taxes 14 4.21. Labor and Employment Matters 14 4.22. No Pending Transactions 15 4.23. Disclosure 15 4.24. Brokers' Fees 15 4.25. Not an Investment Company 15 4.26. Real Property Holding Company 15 SECTION 5 Representations and Warranties of the Purchaser 16 5.1. Accredited Investor; Experience; Risk 16 5.2. Authorization 16 5.3. Governmental Consents 17 5.4. Organization, Good Standing and Qualification 17 SECTION 6 Conditions to Closing of Purchaser 17 6.1. Representations and Warranties Correct 17 6.2. Covenants 17 6.4. No Material Adverse Change 18 6.5. Series C Certificate of Designation 18 6.6. State or Federal Securities Laws 18 6.7. Issuance of Shares 18 6.8. Officer's Certificate 18 6.10. Required Consents 18 6.11. Corporate Documents 18 6.12. Origination Fee 19 SECTION 7 Conditions to Closing of the Company 19 7.1. Representations 19 7.2. Purchase Price 19 7.3. Certificate 19 7.4. State or Federal Securities Laws 19 SECTION 8 Covenants of the Company 20 8.1. Information 20 8.2. Regulatory Matters 21 8.3. Access 21 8.4. Confidentiality 21 8.5 Publicity 22 8.6 IRC Section 1202 22 8.7 Reservation of Common Stock 22 8.8 Registration Rights 22 8.9 Loan Agreement Provisions 22 SECTION 9 Miscellaneous 23 9.1 Amendment; Waiver 23 9.2 Notices 23 9.3 Severability 24 9.4 Successors and Assigns 24 9.5 Survival of Representations, Warranties and Covenants 24 9.6 Entire Agreement 24 9.7 Choice of Law 25 9.8 Counterparts 25 9.9 Costs and Expenses 25 9.10 No Third-Party Beneficiaries 25 9.11 Indemnification 25 9.12. Survival 25 9.13 Indemnification Procedure 26 9.14 Maximum Liability 26 SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE 27 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT This 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of July 27, 1998 (this "Agreement"), is entered into by and among IT Partners, Inc., a Delaware corporation (the "Company") and FBR Business Development Capital, a Delaware business trust (the "Purchaser"). W I T N E S S E T H WHEREAS, the Company desires to issue and sell, and the Purchaser desires to purchase from the Company, shares of the Company's 12% Series C Senior Redeemable Preferred Stock, par value $.01 per share, as adjusted (the "Series C Preferred"), in the amounts and on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: SECTION 1 Definitions 1.1 Defined Terms. The following terms are defined as follows: "Affiliate" means, with respect to any Person, (i) any Person that holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 5% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 5% of the outstanding equity securities or equity interests in a Person, (ii) any brother, sister, parent, child or spouse of such Person or any Person described in clause (i), and (iii) any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity. "Applicable Laws" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Code" means the Internal Revenue Code of 1986 (or any successor thereto), as amended from time to time. "Common Stock" means the common stock, par value $.01 per share, of the Company. "Environmental Law" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "ERISA" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "ERISA Affiliate" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Event of Default" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles. "Hazardous Substances" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Knowledge" or derivations thereof shall mean the knowledge of the executive officers of the Company and of the Presidents of each Subsidiary, and, with respect to Sections 4.19 and 4.21, each person who conducts human resource and employee benefits management functions for the Company or any Subsidiary, whether or not an officer of the Company or such Subsidiary. "Lien" means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Loan Agreement" means the Amended and Restated Loan and Security Agreement dated as of March 31, 1998, by and among the Company, the Lenders named therein, Creditanstalt Corporate Finance, Inc. (as the LC Issuer), Credit Agricole Indosuez (as Co-Agent) and Creditanstalt Corporate Finance, Inc. (as the Collateral Agent and Administrative Agent), as amended from time to time. "Multiemployer Plan" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Obligations" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Origination Fee" means an amount equal to one and one-half percent (1 1/2%) of the Purchase Price, or $105,000. "Permits" means any approvals, authorizations, consents, licenses, permits or certificates. "Person" means an individual, partnership, limited liability company, corporation, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Preferred Stock" means the Series A Preferred Stock of the Company, par value $.01 per share, the Series B Preferred Stock of the Company, par value $.01 per share, and the Series C Preferred. "Qualified Initial Public Offering" means the first offer and sale to the public by the Company of shares of any class of the Company's capital stock, pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission; provided, however, that the proceeds (net of underwriting discounts and commissions) of the shares issued and sold by the Company are at least $40,000,000 in the aggregate. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor environment, or into or out of any property; "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiaries" means each corporation or other entity in which the Company owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests of such corporation or entity. "Trademark License" shall mean any written agreement granting any right to use any Trademark or trademark registration. "Trademarks" shall mean all trademarks (including service marks and trade names, whether registered or at common law), registrations and applications therefor, and all renewals thereof. "Transaction Documents" shall mean this Agreement and each agreement, document, certificate or instrument adopted, entered into or delivered as contemplated herein, including without limitation the Series C Certificate of Designation. Any additional capitalized terms shall have the meanings assigned to them in the text of this Agreement. Terms defined in the singular shall have a comparable meaning when used in the plural and vice versa. SECTION 2 Authorization and Sale of the Company's Stock 2.1 Authorization of Series C Preferred and Common Stock. At Closing, the Company will have authorized the issuance and sale to the Purchaser of 700 shares of Series C Preferred, having the stated value, rights, preferences, privileges and restrictions set forth in the Certificate of Designation attached to this Agreement as Exhibit A (the "Series C Certificate of Designation"). 2.2 Sale and Purchase of Series C Preferred. In reliance on the representations and warranties of the Company contained herein and subject to the terms and conditions hereof, at Closing, the Purchaser agrees to purchase from the Company, and the Company agrees to sell to the Purchaser 700 shares of Series C Preferred for an aggregate purchase price of SEVEN MILLION DOLLARS ($7,000,000) (the "Purchase Price"). 2.3 Use of Proceeds. The Company agrees to use the full proceeds from the sale of the Series C Preferred (i) to continue the Company's acquisition program, (ii) to expand the Company's credit facilities, and (iii) for general corporate purposes. SECTION 3 Closing Date; Delivery 3.1 Closing Date. The closing of the purchase and sale of the Series C Preferred (the "Closing") shall be held at the offices of Wilmer, Cutler & Pickering, 2445 M Street N.W., Washington, D.C. on July 27, 1998, or on such other date or at such other place as the Purchaser and the Company shall mutually agree (the date of the Closing being referred to herein as the "Closing Date"). 3.2 Delivery. At the Closing, the Company shall deliver to the Purchaser (i) certificates evidencing the shares of Series C Preferred being purchased by it registered in the Purchaser's name, and (ii) the Origination Fee (payable by wire transfer of immediately available funds), against delivery to the Company of the Purchase Price (payable by wire transfer of immediately available funds). The parties shall also deliver the other documents and instruments required under this Agreement to be delivered at or prior to Closing. SECTION 4 Representations and Warranties of the Company The Company hereby represents and warrants to the Purchaser as follows: 4.1 Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in all jurisdictions where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to do so would not be material to the Company. Each of the Company and its Subsidiaries has the corporate power and authority and is in possession of all material franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders to own, lease and operate its properties and to carry on its business as now being conducted. 4.2 Capitalization. (a) The authorized capital stock of the Company consists of 26,000,000 shares, of which 20,000,000 shares are common stock, par value $.01 per share ("Common Stock"). As of the date hereof, there are 8,279,658 shares of Common Stock issued and outstanding. No shares of Common Stock are held in treasury. There are 6,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which (i) 600,000 shares have been designated as Series A Preferred Stock, (ii) 5,000,000 shares have been designated as Series B Preferred Stock and (iii) 1,000 shares have been designated as Series C Preferred. As of the date hereof, there are 347,230 shares of Series A Preferred Stock issued and outstanding and 1,387,448 shares of Series B Preferred Stock issued and outstanding. No shares of Series C Preferred are currently issued and outstanding. Except as set forth above, there are no shares of capital stock of the Company authorized or, as of the date hereof, issued or outstanding. The issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non-assessable. (b) Except as listed on Schedule 4.2, there are outstanding (a) no shares of capital stock or other voting stock of the Company, (b) no securities of the Company, any Subsidiary or any Person convertible into or exchangeable for shares of capital stock or voting securities of the Company, (c) no options, warrants or other rights to acquire from the Company or any Subsidiary (including any rights issuable or issued under any shareholder rights plan or similar arrangement), and no obligations, contingent or otherwise, of the Company or any Subsidiary to issue any capital stock, voting securities or securities convertible into or exchangeable for, capital stock or voting securities of the Company or any Subsidiary, (d) no equity equivalent in the earnings or ownership of the Company, any Subsidiary or any Person or any similar rights to share earnings or ownership and (e) no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of its securities or to make any investment (by loan, capital contribution or otherwise) in any entity or Person. Except as set forth on Schedule 4.2, the Company has no employee stock purchase plans, stock option plans or other form of company benefit plan which provides for the issuance, exchange or distribution of capital stock. All outstanding options, rights and warrants have been duly and validly issued and are in full force and effect. All shares of capital stock subject to issuance upon exercise of any options, rights or warrants or otherwise, upon issuance pursuant to the instruments under which they are issuable, shall be duly authorized, validly issued, fully paid for and non-assessable and, except as set forth on Schedule 4.2, free of all preemptive rights. No outstanding options, warrants or other securities exercisable for or convertible into shares of capital stock of the Company require anti-dilution adjustments by reason of the consummation of the transactions contemplated hereby. (c) The Company has reserved for issuance 9,075,004 shares of Common Stock upon exercise or conversion of currently outstanding shares of Preferred Stock and rights, options, warrants and other convertible securities. The shares of Series C Preferred to be issued pursuant to this Agreement, upon delivery to the Purchaser of certificates therefor against payment in accordance with the terms of this Agreement, and the shares of Common Stock issuable upon redemption of the Series C Preferred, upon delivery to the Purchaser of certificates therefor in accordance with the provisions of the Series C Certificate of Designation, (i) will be validly issued, fully paid and non-assessable, (ii) will be free and clear of all Liens other than restrictions on transfers imposed by federal or state securities laws and by this Agreement and the other Transaction Documents, and (iii) assuming that the representations of the Purchaser in Section 5 hereof are true and correct, will be issued in compliance with all applicable federal and state securities laws. The Company has reserved for issuance 678,572 shares of Common Stock upon redemption of the Series C Preferred. 4.3 Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of all Subsidiaries of the Company, showing (as to each such Subsidiary) the date of its incorporation, the jurisdiction of its incorporation, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders of such Subsidiaries and the number and percentage of the outstanding shares of each such class owned, directly or indirectly, by all such stockholders, including the Company. Except as set forth on Schedule 4.3, at Closing, all of the outstanding capital stock of, or other ownership interests in, each Subsidiary, is owned by the Company, directly or indirectly, free and clear of any Lien or any other limitation or limitation or restriction (including restrictions on the right to vote). All outstanding shares of the capital stock of the Company and any Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and are free of any preemptive rights. There are no outstanding securities of any Subsidiary convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of any Subsidiary, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating any Subsidiary to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and, except as set forth on Schedule 4.3, there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of any Subsidiary. 4.4 Partnerships, Joint Ventures. Schedule 4.4 sets forth a complete and accurate list of all partnerships, limited partnerships, limited liability companies or joint venture of any kind in which the Company or any Subsidiary holds any interests, showing the date of its incorporation, the jurisdiction of its incorporation, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders (or other equity interest holders) of such entity and the number and percentage of the outstanding shares of each such class owned, directly or indirectly, by all such stockholders, including the Company or any Subsidiary. Except as set forth on Schedule 4.4, at Closing, such capital stock of, or other ownership interests in, each entity as set forth in Schedule 4.4 is owned by the Company, directly or indirectly, free and clear of any Lien or any other limitation or restriction (including restrictions on the right to vote). All outstanding shares of the capital stock held by the Company and any Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and are free of any preemptive rights. Except as set forth on Schedule 4.4, the Company is not a party to, and does not hold, any equity interests in any partnership, limited partnership, limited liability company or other joint venture of any kind. 4.5 Authorization. The Company has all requisite corporate power and authority to execute and deliver the Transaction Documents and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Transaction Documents and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate, including shareholder (if required), action on the part of the Company. Each Transaction Document to which the Company is a party has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 4.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the valid execution and delivery by the Company of the Transaction Documents to which it is a party, or the consummation by the Company of the transactions contemplated by the Transaction Documents to which it is a party, except for filings pursuant to federal or state securities laws and the filing of the Certificate of Designation with the Secretary of State of Delaware. 4.7 Conformity with Law; Absence of Litigation. None of the Company or any of its Subsidiaries has violated any law or regulation or any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it which would have a material adverse effect on the Company and the Subsidiaries taken as a whole. Except as set forth on Schedule 4.7, there are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, which would reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. 4.8 Insurance. Schedule 4.8 sets forth a complete and accurate list of all policies of insurance of any kind or nature covering the Company, its Subsidiaries and any of their respective employees, properties or assets, including, without limitation, policies of life, disability, fire, theft, workers compensation, employee fidelity and other casualty and liability insurance. All such policies are in full force and effect. None of the Company or any of its Subsidiaries is in material default of any policies of insurance. 4.9 Adequacy of Intangible Assets. The Company and each of its Subsidiaries possess all intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, and trade names, and all governmental registrations and licenses (collectively, "Intellectual Property") reasonably necessary to conduct the businesses of the Company and each of the Subsidiaries, and all such intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, trade names, licenses and registrations which have been registered with any governmental authority are listed on Schedule 4.9. Since May 1, 1997, neither the Company nor any of the Subsidiaries has received any written communications alleging that the Company or any of its Subsidiaries has violated or, by conducting its business as proposed, would violate any of the Intellectual Property of any other Person, nor does the Company have Knowledge of any such violations. 4.10 Compliance with Other Instruments and Legal Requirements. (a) None of the Company or any of its Subsidiaries is in violation or default of any provisions of its certificate of incorporation, by-laws, or comparable organizational documents. None of the Company or any of its Subsidiaries is in violation or default in any respect under any provision, instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound or of any provision of any federal, state or local statute, rule or regulation applicable to the Company or any of its Subsidiaries (including, without limitation, any law, rule or regulation relating to protection of the environment and the maintenance of safe and sanitary premises). The execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time or giving of notice, either a default under or give rise to any obligations under, the certificate of incorporation or by-laws of the Company or any of the Subsidiaries, or any note, bond, mortgage, indenture, lease, license, permit, contract, agreement or other instrument or obligation, decree or order to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or its properties or assets is or may be bound, or violate any law, order, rule or regulation applicable to the Company or any Subsidiary. Except as set forth on Schedule 4.10 (the "Required Consents"), the execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not and does not require any consent, waiver or approval by any Person, or constitute an event that will result in the creation of any Lien upon any assets of the Company or any of its Subsidiaries. (b) The Company and its Subsidiaries have all Permits of all Persons required to conduct their respective businesses as currently conducted. (c) The transactions contemplated by this Agreement and the Transaction Documents will not constitute a change of control under any Employee Benefit Plan, rights plan, contract or agreement to which it is a party, or under any law, rule or regulation to which it is subject. 4.11 Material Agreements; Action. Except as set forth on Schedule 4.11, there are no material contracts, agreements, commitments, understandings or proposed transactions, whether written or oral, to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties or assets are bound that involve or relate to: (i) any of their respective officers, directors, stockholders (or other equity interest holder) or partners or any Affiliate thereof; (ii) the sale of any of the assets of the Company or any of its Subsidiaries other than in the ordinary course of business; (iii) covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with the Company or any of its Subsidiaries in any line of business or in any geographical area; (iv) the acquisition by the Company or any of its Subsidiaries of any operating business or the capital stock of any other Person; (v) the borrowing of money; (vi) the expenditure of more than $50,000 in the aggregate or the performance by the Company or any Subsidiary extending for a period more than one year from the date hereof, other than in the ordinary course of business, or (vii) the license of any Intellectual Property or other material proprietary right to or from the Company or any of its Subsidiaries. There have been made available to the Purchaser and its representatives true and complete copies of all such agreements. All such agreements are in full force and effect and are the legal, valid and binding obligation of the Company or its Subsidiaries. None of the Company or any of its Subsidiaries is in default under any such agreements nor, to the Knowledge of the Company, is any other party to any such agreements in default thereunder in any respect. 4.12 Registration Rights. Except as set forth on Schedule 4.12, the Company has not granted or agreed to grant any registration rights, including without limitation piggyback registration rights, to any Person. 4.13 Corporate Documents. True and correct copies of the certificate of incorporation and the by-laws of the Company and each of the Subsidiaries, as amended and as are currently in effect, have been delivered to the Purchaser. 4.14 Real Property. (a) Schedule 4.14(a) sets forth a complete list of all real property and interests in real property owned (the "Owned Properties") or leased (as lessee or lessor) (the "Leased Properties") by the Company or any of its Subsidiaries (the Leased Properties together with the Owned Properties, being referred to herein individually as a "Company Property" and collectively as the "Company Properties"). The Company Property constitutes all interests in real property currently used or currently held for use in connection with the businesses of the Company and its Subsidiaries and which are necessary for the continued operation of the businesses of the Company and its Subsidiaries as such businesses are currently conducted. The Company and its Subsidiaries have a valid and enforceable leasehold interest under each of the leases for Leased Property (the "Real Property Leases"), and none of the Company or any of its Subsidiaries has received any written notice of any default or event which, with notice or lapse of time, or both, would constitute a default by the Company or any of its Subsidiaries under any of the Real Property Leases. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Real Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) The Company and its Subsidiaries have all certificates of occupancy and Permits of any Person necessary or useful for the current use and operation of each Company Property, and the Company and its Subsidiaries have fully complied with all conditions of the Permits applicable to them. No default or violation, or event which, with the lapse of time or giving of notice or both would become a default or violation, has occurred in the due observance of any such Permit, which could reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. (c) There does not exist any actual or threatened or contemplated condemnation or eminent domain proceedings that affect any Company Property or any part thereof, and none of the Company or any of its Subsidiaries has received any notice, oral or written, of the intention of any governmental body or other Person to take or use all or any part thereof. (d) None of the Company or any of its Subsidiaries has received any written notice from any insurance company that has issued a policy with respect to any Company Property requiring performance of any structural or other repairs or alterations to such Company Property. (e) None of the Company or any of its Subsidiaries owns or holds, or is obligated under or a party to, any option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any real estate or any portion thereof or interest therein. 4.15 Tangible Personal Property. (a) Schedule 4.15(a) sets forth all leases of personal property ("Personal Property Leases") involving annual payments in excess of $15,000 relating to personal property used in the business of the Company and its Subsidiaries or to which the Company or any of its Subsidiaries is a party or by which the properties or assets of the Company or any of its Subsidiaries is bound. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) Each of the Company and its Subsidiaries has a valid leasehold interest under each of the Personal Property Leases under which it is a lessee, and there is no default under any Personal Property Lease by the Company or any of its Subsidiaries, or to the Knowledge of the Company, by any other party thereto, and no event has occurred which, with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any other party thereto. (c) Except as set forth on Schedule 4.15(b), each of the Company and its Subsidiaries has good and marketable title to all of the items of tangible personal property reflected in the Company Financial Statements referred to in Section 4.17 (except as sold or disposed of subsequent to the date thereof in the ordinary course of business consistent with past practice), free and clear of any and all Liens. All such items of tangible personal property that, individually or in the aggregate, are material to the operation of the business of the Company and its Subsidiaries are in good condition and are currently usable in the ordinary course. (d) All of the items of tangible personal property used by the Company and its Subsidiaries under the Personal Property Leases are in good condition and are currently usable in the ordinary course. Environmental Matters. Except as set forth on Schedule 4.16: (a) The Company and each of its Subsidiaries have obtained all permits, licenses and other authorizations, if any, which are required under Environmental Laws for the operation of the Company's or such Subsidiary's business and the Company and each of its Subsidiaries are in compliance with all terms and conditions of required permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, notifications, schedules and timetables contained in the Environmental Laws; (b) Neither the Company nor any of its Subsidiaries has Knowledge of or has received notice of, the disposal or release or presence of Hazardous Substances on any of its properties, or of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance on the part of the Company or any such Subsidiary with Environmental Laws, or may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, Lien, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Substance; (c) All assets of the Company and its Subsidiaries are free from Hazardous Substances except for Hazardous Substances used, maintained or handled by the Company or such Subsidiary in the ordinary course of business and the use and disposal of any and all such Hazardous Substances is effected by the Company or such Subsidiary in compliance with all applicable Environmental Laws; and (d) There is not pending or threatened against the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries Knows of any facts or circumstances that might give rise to, any civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, environmental Lien, investigation, or proceeding relating in any way to Environmental Laws. 4.17 Company SEC Reports and Financial Statements. (a) Neither the Company nor any of the Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) The Company has furnished to the Purchaser (a) true, complete and correct copies of the Company's unaudited, consolidated balance sheet (the "Interim Balance Sheet") as of June 30, 1998 (the "Balance Sheet Date"), and statements of income and cash flow for the periods ended June 30, 1998 (collectively, the "Interim Financials") compiled by the Company, and (b) true, complete and correct copies of the Company's audited balance sheet as of December 31, 1997 and consolidated statements of income, cash flow and stockholders' equity for the fiscal year ended December 31, 1997 (collectively, the "Audited Financials") (collectively, the "Interim Financials" and the "Audited Financials" are referred to as the "Company Financial Statements"). The Company Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied throughout the periods involved (except that the Interim Financial Statements do not contain footnotes required by GAAP and are subject to normal year-end adjustments). The Company Financial Statements present fairly the financial condition and results of operations of the Company, as at the dates and for the periods indicated. Since the Balance Sheet Date there have been no material changes in the Company's accounting policies. (c) Except to the extent set forth on the Interim Balance Sheet or on Schedule 4.17, the Company has not incurred any liability or obligation of any nature whatsoever (whether due or to become due, accrued, fixed, contingent, liquidated, unliquidated or otherwise) that would be required by GAAP to be accrued on, reflected on, or reserved against it, on a consolidated balance sheet (or in the applicable notes thereto) of the Company prepared in accordance with GAAP consistently applied, other than liabilities or obligations which arose in the ordinary course of business and consistent with past practices since such date and which do not exceed $2.5 million in the aggregate. 4.18 Changes. Except as set forth on Schedule 4.18, since the Balance Sheet Date, there has not been: (a) any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries, except changes in the ordinary course of business; (b) any damage, destruction or loss to any property or assets of the Company or any of the Subsidiaries, whether or not covered by insurance; (c) any waiver by the Company or any of its Subsidiaries of a material right or of a debt owed to it outside of the ordinary course of business; (d) any satisfaction or discharge of any Lien or payment of any obligation by the Company or any of its Subsidiaries; (e) any change or amendment to a contract or arrangement by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound or subject; (f) any events or circumstances that otherwise could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company or any of its Subsidiaries; and (g) none of the Company or any of its Subsidiaries has (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock or equity interests, (ii) incurred any indebtedness for money borrowed in excess of $50,000, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses not exceeding $50,000, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights for consideration in excess of $50,000 in any one transaction or series of related transactions. 4.19 Employee Benefit Plans. Except as set forth on Schedule 4.19: (a) Identification of Plans. Neither the Company nor any ERISA Affiliate maintains or contributes to, or has maintained or contributed to, any Plan or Multiemployer Plan that is subject to regulation by Title IV of ERISA; (b) Compliance. Each Plan has at all times been maintained, by its terms and in operation, in accordance with all Applicable Laws. (c) Liabilities. Neither the Company nor any ERISA Affiliate is currently or, to the best knowledge of the Company or any ERISA Affiliate, will become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any person whomsoever with respect to any Plan, including, but not limited to, any tax, penalty or liability arising under Title I or title IV of ERISA or Chapter 43 of the Code, except such liabilities which will not have a material adverse effect on the Company and the Subsidiaries taken as a whole. (d) Funding. The Company and each ERISA Affiliate has made full and timely payment of (i) all amounts required to be contributed under the terms of each Plan and Applicable Law and (ii) all material amounts required to be paid as expenses of each Plan. No Plan has any "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA); and (e) Insolvency; Reorganization. No Plan is insolvent (within the meaning of Section 4245 of ERISA) or in reorganization (within the meaning of Section 4241 of ERISA). 4.20 Taxes. All federal, state and local and foreign tax returns, reports and statements required to be filed by the Company or any of its Subsidiaries have been filed or have been caused to be filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed and all such returns, reports and statements are true, complete and correct in all respects. All taxes, charges and other impositions due and payable by the Company or any of its Subsidiaries have been paid in full on a timely basis except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books and records of the Company or Subsidiary in accordance with GAAP. The provision for taxes of each of the Company and its Subsidiaries is sufficient for all unpaid taxes, charges and other impositions of any nature due or accrued as of the date thereof, whether or not assessed or disputed. Proper and accurate amounts have been withheld by the Company and its Subsidiaries from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective governmental agencies. The Company has not received notice of any audit or of any proposed deficiencies from any governmental authority, and no controversy with respect to taxes of any type is pending or to its Knowledge threatened. Except for routine filing extensions granted as a matter of right under applicable law, none of the Company or any of its Subsidiaries has executed or filed with the IRS or any other governmental authority any agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes, charges or other impositions. Except as set forth on Schedule 4.20, none of the Company or any of its Subsidiaries has agreed or is required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. Further, none of the Company or any of its Subsidiaries has any obligation under any tax-sharing agreement. 4.21 Labor and Employment Matters. With respect to employees of and service providers to the Company and the Subsidiaries: (a) the Company and the Subsidiaries are and have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice; (b) there is not now, nor within the past three years has there been, any unfair labor practice complaint against the Company or any Subsidiary pending or, to the Company's or any Subsidiary's Knowledge, threatened before the National Labor Relations Board or any other comparable authority; (c) there is not now, nor within the past three years has there been, any labor strike, slowdown or stoppage actually pending or, to the Company's or any Subsidiary's Knowledge, threatened against or directly affecting the Company or any Subsidiary; (d) to the Company's or any Subsidiary's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending and, to the Company's or any Subsidiary's Knowledge, no claims therefor exist or have been threatened; (f) the employees of the Company and the Subsidiaries are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against the Company or any Subsidiary or currently being negotiated by the Company or any Subsidiary; and (g) all Persons classified by the Company or its Subsidiaries as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and the Company and its Subsidiaries have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. 4.22 No Pending Transactions. Except as set forth on Schedule 4.22 and except for the transactions contemplated by this Agreement, neither the Company nor any Subsidiary is a party to or bound by or the subject of any agreement, undertaking or commitment with any Person that could result in (i) the sale, merger, consolidation or recapitalization of the Company or any Subsidiary, (ii) the sale of all or substantially all of the assets of the Company or any Subsidiary, or (iii) a change of control of more than five percent (5%) of the outstanding capital stock of the Company or any Subsidiary. 4.23 Disclosure. No representation or warranty by the Company contained in any of the Transaction Documents, in the schedules attached hereto or in any certificate furnished or to be furnished by the Company to the Purchaser in connection herewith or pursuant hereto contains or will contain any untrue statement or a material fact or omits or will omit to state any material fact necessary in order to make any statement contained herein or therein not misleading. 4.24 Brokers' Fees. Except as set forth on Schedule 4.24, no broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Company. 4.25 Not an Investment Company. The Company is not an Investment Company within the meaning of the Investment Company Act of 1940, as amended. 4.26 Real Property Holding Company. The Company is not a United States Real Property Holding Corporation within the meaning of Section 897(c)(2) of the Code. 4.26 Total Shares Outstanding. Schedule 4.27 sets forth the capitalization of the Company as of the date hereof (including without limitation all options, warrants and other instruments convertible into or exchangeable for equity securities of the Company). SECTION 5 Representations and Warranties of the Purchaser The Purchaser hereby represents and warrants to the Company, as follows: 5.1 Accredited Investor; Experience; Risk. (a) The Purchaser is an accredited investor and has been advised and understands that the Series C Preferred and the Common Stock issuable upon redemption of the Series C Preferred have not been registered under the Securities Act, on the basis that no public offering of the Series C Preferred or the Common Stock issuable upon redemption of the Series C Preferred has been effected, except in compliance with the applicable securities laws and regulations or pursuant to an exemption therefrom; provided, however, that nothing in this Section 5.1 shall limit the Purchaser's right to redeem the Series C Preferred for Common Stock as set forth in this Agreement or the Series C Certificate of Designation. (b) Such Purchaser is purchasing the Series C Preferred for investment purposes, for its own account and not with a view to, or for sale in violation of federal or state securities laws. (c) Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Series C Preferred pursuant to this Agreement. (d) The certificates representing the Series C Preferred and the shares of Common Stock issuable upon redemption of the Series C Preferred shall bear a legend evidencing such restriction on transfer substantially in the following form: "The securities represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended (the "Act") or the securities laws of any state and may not be sold or transferred except pursuant to registration under the Act or an exemption therefrom." 5.2 Authorization. The Purchaser has all requisite power and authority to execute and deliver each of the Transaction Documents and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Transaction Documents and the transactions contemplated hereby and thereby have been duly authorized by all necessary, action on the part of the Purchaser. Each Transaction Document to which it is a party has been duly and validly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 5.3 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Purchaser is required in connection with the valid execution and delivery by the Purchaser of the Transaction Documents to which it is a party, or the consummation by the Purchaser of the transactions contemplated by the Transaction Documents to which it is a party, except for such filings as have been made prior to the Closing. 5.4 Organization, Good Standing and Qualification. The Purchaser (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in all jurisdictions where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to do so would not be material to the Purchaser. The Purchaser has the power and authority and is in possession of all material franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders to (i) own, lease and operate its properties and to carry on its business as now being conducted and (ii) execute and deliver the Transaction Documents and the documents and instruments contemplated hereby and thereby and to consummate the transactions contemplated hereby. SECTION 6 Conditions to Closing of Purchaser The Purchaser's obligation to purchase the Series C Preferred at the Closing is, at the option of such Purchaser, subject to the fulfillment on or prior to the Closing Date of the following conditions: 6.1 Representations and Warranties Correct. The representations and warranties made by the Company in Section 4 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. 6.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all respects. 6.3 Opinion of Company's Counsel. The Purchaser shall have received from Swidler & Berlin, counsel to the Company, an opinion addressed to the Purchaser, dated the Closing Date, that is customary for a transaction of this type. 6.4 No Material Adverse Change. Since the Balance Sheet Date, there shall not have occurred any events or circumstances that could reasonably be expected, individually or in the aggregate, to have a material effect on the Company or any of the Subsidiaries. 6.5 Series C Certificate of Designation. The Series C Certificate of Designation shall have been duly adopted and executed by the Company and filed with the Secretary of State of the State of Delaware. 6.6 State or Federal Securities Laws. All registrations, qualifications and Permits required under applicable state or federal securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. 6.7 Issuance of Shares. The Company shall have issued pursuant to this Agreement 700 shares of Series C Preferred, par value $.01 per share, as adjusted, and shall have delivered to the Purchaser a stock certificate or certificates representing such shares of Series C Preferred. 6.8 Officer's Certificate. The Purchaser shall have received a certificate of the President or a Vice President of the Company to the effect that the conditions set forth in Sections 6.1, 6.2, 6.4, 6.5 and 6.6 have been met. 6.9 CFO Certificate. The Purchaser shall have received a certificate of the Chief Financial Officer of the Company substantially in the form attached hereto as Exhibit 6.9. 6.10 Required Consents. At or prior to the Closing, the Company shall have delivered or caused to be delivered to the Purchaser all of the Required Consents 6.11 Corporate Documents. At or prior to the Closing, the Company shall have delivered or caused to be delivered to the Purchaser: (a) a certificate of the Secretary of State of the Company's state of incorporation dated not earlier than the tenth (10th) day preceding the Closing Date, to the effect that the Company is a corporation validly existing and in good standing under the laws of such state as of such date; (b) a certificate of the Secretary of State of each state where the Company is required to qualify to do business dated not earlier than the tenth (10th) day preceding the Closing Date, to the effect that the Company is a corporation duly licensed or qualified to do business in such state and is in good standing as a foreign corporation under the laws of such state as of such date; and (c) certificates of the Secretary or Assistant Secretary of the Company certifying (A) copies of the certificate of incorporation, bylaws and other governing documents of the Company as then in effect or a certification that there has been no change in such instruments since the last such certification delivered to the Purchaser pursuant to this Agreement, (B) duly enacted resolutions of the Company's board of directors in form and substance satisfactory to the Purchaser approving the Transaction Documents and authorizing officers of the Company to execute and deliver instruments required to be delivered hereunder or thereunder as a condition precedent to the Closing, and (C) specimen signatures of the officers of the Company authorized to sign such instruments. 6.12 Origination Fee. The Company shall have tendered to the Purchaser the Origination Fee as set forth in Section 3.2. SECTION 7 Conditions to Closing of the Company The Company's obligation to issue and sell the Series C Preferred at the Closing is, at the option of the Company, subject to the fulfillment of the following conditions: 7.1 Representations. The representations and warranties made by the Purchaser in Section 5 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. 7.2 Purchase Price. The Purchaser shall have tendered to the Company the Purchase Price, as set forth in Section 3.2. 7.3 Certificate. The Company shall have received a certificate from the Purchaser to the effect that the conditions set forth in Section 7.1 have been met. 7.4 State or Federal Securities Laws. All registrations, qualifications and Permits required under applicable state or federal securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. SECTION 8 Covenants of the Company 8.1 Information. (a) Commencing on the Closing Date, the Company shall deliver to the Purchaser the information specified in this Section8.1(a) unless the Purchaser at any time specifically requests in writing that such information not be delivered to it: (i) Loan Agreement Reports and Information. Commencing on the Closing Date, the Company shall deliver to the Purchaser the same reports and other information provided to the Lender pursuant to Section 6.2(a) - (g) of the Loan Agreement; provided, however, that in the event such provisions of the Loan Agreement are from time to time amended, modified or changed after the Closing Date, Purchaser shall have the right at its option to either (i) continue to receive such reports and information as such sections of the Loan Agreement provide for as of the Closing Date, or (ii) receive such reports and information as such sections of the Loan Agreement provide for following such amendment, modification or change. (ii) Other Information. From time to time, and promptly, such additional information regarding results of operations, financial condition or business of the Company and its Subsidiaries, including without limitation, cash flow analysis, stockholder equity, projections, minutes of any meetings of the Board of Directors and any information that may be distributed or made available to the Board of Directors, as the Purchaser may reasonably request. (b) Commencing on October 1, 1998, the Company shall deliver to the Purchaser the information specified in this Section 8.1(b) unless the Purchaser at any time specifically requests in writing that such information not be delivered to it: (i) Material Litigation. Within ten (10) days after the Company learns of the commencement or written threat of commencement of any litigation or proceeding against the Company, any of its Subsidiaries or any of their respective assets that could reasonably be expected to have a material effect on the Company or any of the Subsidiaries, written notice of the nature and extent of such litigation or proceeding. (ii) Material Agreements. Within five (5) days after the expiration of the applicable cure period, if any, or if no such cure period exists within ten (10) days after the receipt by the Company of written notice of a default by the Company or any of its Subsidiaries under any material contract, agreement or document to which any of them are a party or by which any of them are bound, written notice of the nature and extent of such default. 8.2 Regulatory Matters. Each of the Company and Purchaser will (i) make on a prompt and timely basis all governmental or regulatory notifications, filings or submissions, as necessary for the consummation of the transactions contemplated hereby, including any filings required pursuant to the Hart-Scott-Rodino Antitrust Act, if required, (ii) use all reasonable efforts to cooperate with the other and its representatives in (A) determining which notifications, filings and submissions are required to be made prior to the Closing Date with, and which consents, approvals, permits or authorizations are required to he obtained prior to the Closing Date from, any governmental authority in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and (B) timely making of all such notifications, filings or submissions and timely seeking all such consents, approvals, permits or authorizations, and (iii) use all reasonable efforts to take, or cause to be taken, all other action and do, or cause to be done, all other reasonable things necessary or appropriate to consummate the transactions contemplated by this Agreement. The Purchaser shall have no obligation to expend any funds in connection with the action to be taken by the Company pursuant to this section. 8.3 Access. From time to time and upon the written request of the Purchaser, the Company shall promptly afford the Purchaser and its accountants, counsel and other representatives, full access during normal business hours to all of its properties, books, contracts, commitments and records, permit them to copy or make extracts therefrom, and the Company shall furnish promptly to Purchaser all information concerning its business, properties and personnel as Purchaser may reasonably request; provided, however, that no investigation pursuant to this Section 8.3 shall affect any representations or warranties of either party hereunder. 8.4 Confidentiality. From and after the date of this Agreement, each of the Company and Purchaser agree to hold, and will cause its Subsidiaries, employees, agents and representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or, in the written opinion of their counsel, by other requirements of law, information furnished by the Company, on the one hand, to Purchaser and information furnished by Purchaser, on the other hand, to the Company in connection with the transactions contemplated by this Agreement, and each of such persons agree that they shall not release or disclose such information to any other person, except their respective officers, directors, partners, employees, auditors, attorneys, financial advisors and other consultants, advisors and representatives who need to know such information and who have been informed of the confidential nature of such information and have been directed to treat such information as confidential, and except that Purchaser shall have the right to disclose such information to any of its investors or other equity holders, or to any of its potential investors or equity holders as long as the same have been informed of the confidential nature of such information and have been directed to treat such information as confidential. The foregoing provisions of this Section 8.4 shall not apply to any such information which (i) becomes generally available to the public other than as a result of a disclosure by any person bound hereunder, (ii) was available to a person bound hereunder on a non-confidential basis prior to its disclosure hereunder, or (iii) becomes available to any person bound hereunder on a non-confidential basis by virtue of the disclosure thereof by a source other than the party providing such information in reliance upon the protection of confidentiality reposed hereby. 8.5 Publicity. Except as may be required by law, the Company shall not use the name of, or make reference to, the Purchaser or any of its Affiliates in any press release or in any public manner without the Purchaser's prior written consent. 8.6 IRC Section 1202. The Company shall use reasonable efforts to comply with Section 1202(c) of the Code and shall make all filings required under Section 1202(D)(1)(c) of the Code and any related treasury regulations. 8.7 Reservation of Common Stock. The Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Common Stock upon a redemption of the Series C Preferred, the number of shares of Common Stock deliverable upon redemption of all outstanding shares of Series C Preferred. 8.8 Registration Rights. Prior to consummating an initial public offering of capital stock of the Company, the Company will use its best efforts to terminate the existing registration rights agreements relating to the Company's securities and to enter into a new registration rights agreement which grants to the Purchaser (i) at least one demand registration right which is at least as favorable as the most favorable demand registration right granted to any other holder of securities of the Corporation, and (ii) piggyback, cutback and other registration rights at least as favorable as, and ranking at least pari passu in priority with, the most favorable piggyback, cutback and other registration rights granted to any other holder of securities of the Corporation; provided, however, that in the event the Company has not entered into such new registration rights agreement within one year following the filing of the Series C Certificate of Designation and the Series C Preferred has not been redeemed in full within such period, the events of noncompliance provisions set forth in the Series C Certificate of Designation shall apply. 8.9 Loan Agreement Provisions. The Company shall not, without the prior written consent of the Purchaser, which consent may be withheld at the Purchaser's sole discretion: (i) amend, modify, add to or otherwise change any of the provisions in Section 8.5 of the Loan Agreement relating to the redemption of, or payment of dividends on, the Series C Preferred; or (ii) agree to any full or partial refinancing or replacement of the Loan Agreement unless such refinancing or replacement permits the redemption of, and payment of dividends on, the Series C Preferred in accordance with Section 8.5 of the Loan Agreement as in effect on the date hereof. SECTION 9 Miscellaneous 9.1 Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified, supplemented or waived, except by a written instrument executed by (i) the Company and (ii) the Purchaser. 9.2 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person, transmitted by facsimile transmission (fax) or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing: if to the Company: IT Partners, Inc. 9881 Broken Land Parkway Columbia, Maryland Attn: President Telephone No.: (410) 309-9800 Facsimile No.: (410) 309-9801 with a copy to: Swidler & Berlin, Chartered 3000 K Street, N.W., Suite 300 Washington, D.C. 20007-5116 Attn: Andrew M. Ray, Esq. Telephone No.: (202) 424-7585 Facsimile No.: (202) 424-7645 if to the Purchaser: c/o FBR Business Development Capital Potomac Tower 1001 Nineteenth Street North 18th Floor Arlington, Virginia 22209 Attn: Ronald G. Hodge II Telephone No.: (703) 469-1314 Facsimile No.: (703) 469-1012 with a copy to: Wilmer, Cutler & Pickering 100 Light Street Baltimore, Maryland 21202 Attn: George P. Stamas, Esq. Telephone No.: 410-986-2800 Facsimile No.: 410-986-2828 A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. 9.3 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 9.4 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the parties hereto. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto; provided, however, that all or any part of the shares of the Series C Preferred may be transferred, sold, assigned or otherwise disposed at the sole discretion of Purchaser and without the consent of the Company. 9.5 Survival of Representations, Warranties and Covenants. All representations and warranties made in, pursuant to or in connection with any of the Transaction Documents shall survive the execution and delivery of the Transaction Documents, any investigation at any time made by or on behalf of the Purchaser, and the sale and purchase of the Series C Preferred and payment therefor for a period of three (3) years; provided, however, that the representations and warranties made in Sections 4.16 (Environmental), 4.19 (Benefits) and 4.20 (Taxes) shall survive the applicable statutory period of limitations with respect to any liabilities covered thereby; provided further, that notwithstanding the foregoing, all representations and warranties made in, pursuant to or in connection with any of the Transaction Documents shall terminate upon the closing of a Qualified Initial Public Offering. Unless otherwise provided in this Agreement, the covenants made pursuant to the Transaction Documents shall survive and remain in force until no shares of Series C Preferred remain issued and outstanding. 9.6 Entire Agreement. This Agreement and the other documents delivered pursuant hereto, including without limitation the Transaction Documents, constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written, among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof. 9.7 Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. 9.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 9.9 Costs and Expenses. Promptly after the Closing, the Company shall pay the reasonable fees and disbursements incurred by the Purchaser (including without limitation reasonable attorneys' and consultants' fees) in connection with this Agreement and the transactions contemplated hereunder; provided, however, that the Company's aggregate payment obligations under this Section 9.9 shall not exceed $15,000; provided further, that the parties shall bear their own costs and expenses if the Closing hereunder fails to take place. 9.10 No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any Person (specifically including any employees of the Company and its Subsidiaries) or entity that is not a party to this Agreement. 9.11 Indemnification. From and after the Closing Date, the Company shall indemnify, defend and hold Purchaser, its directors, officers and Affiliates (each an "Indemnified Party" and collectively, the "Indemnified Parties") harmless from and against any and all claims, losses, liabilities, damages, costs and expenses (including reasonable attorney's fees) (collectively, "Losses") that may be suffered or incurred by, or asserted against, the Indemnified Parties, arising from or related to, directly or indirectly: (a) any breach of any representation or warranty of the Company or any Subsidiary set forth in any of the Transaction Documents (including without limitation any schedule or certificate delivered by or on behalf of the Company or any Subsidiary pursuant hereto or thereto); or (b) any nonfulfillment of any covenant or agreement on the part of the Company or any Subsidiary in any of the Transaction Documents; and (c) any and all Losses incident to any of the foregoing. 9.12. Survival. The rights to indemnification under Section 9.11 shall apply only to those claims for indemnification which are delivered pursuant hereto on or before the expiration of the relevant representation, warranty, or covenant to which such claim relates, as set forth in Section 9.5. 9.13 Indemnification Procedure. (a) An Indemnified Party shall give written notice to the Company of any claim with respect to which it seeks indemnification within ten (10) days after the discovery by such parties of any matters giving arise to a claim for indemnification pursuant to Section 9.11; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Company of its obligations under this Section 9.13, except to the extent that the Company is actually prejudiced by such failure to give notice. In case any such action or claim is brought against any Indemnified Party, the Company shall be entitled to participate in and, unless in the reasonable good faith judgment of the Indemnified Party a conflict of interest between such Indemnified Party and the Company may exist in respect of such action or claim, to assume the defense thereof, with counsel satisfactory to the Indemnified Party and after notice from the Company to the Indemnified Party of its election so to assume the defense thereof, the Company shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In any event, unless and until the Company elects in writing to assume and does so assume the defense of any such action or claim the Indemnified Party's costs and expenses arising out of the defense, settlement or compromise of any such action or claim shall be Losses subject to indemnification hereunder. If the Company elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The Company shall not be liable for any settlement of any action or claim effected without its written consent. Anything in this Section 9.13 to the contrary notwithstanding, the Company shall not, without the Indemnified Party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof that imposes any future obligation on the Indemnified Party or that does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party, a release from all liability in respect of such claim. 9.14 Maximum Liability. The maximum liability of each of the Company and the Purchaser, respectively, under this Section 9 shall be equal to the Purchase Price. [Remainder of Page Intentionally Left Blank] 12% SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement to be executed effective as of the date first above written. THE COMPANY: IT PARTNERS, INC. By: /s/ Jamie E. Blech -------------------- Name: Jamie Blech Title: President and Secretary PURCHASER: FBR BUSINESS DEVELOPMENT CAPITAL By: /s/ Ronald G. Hodge II ----------------------- Name: Ronald G. Hodge II Title: President and Chief Executive Officer EX-4.11 8 SERIES C CERTIFICATE OF DESIGNATION EXECUTION COPY - ----------------------------------------------------------------------------- CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF 12% SERIES C SENIOR REDEEMABLE PREFERRED STOCK OF IT PARTNERS, INC, - ---------------------------------------------------------------------------- CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS OF 12% SERIES C SENIOR REDEEMABLE PREFERRED STOCK OF IT PARTNERS, INC. Pursuant to Section 151 of the General Corporation law of the State of Delaware We, the undersigned, Daniel J. Klein, Chairman of the Board, and Jamie Blech, Secretary, respectively, of IT Partners, Inc., a Delaware corporation (the "Corporation"), pursuant to the provisions of Section 151 of the General Corporation Law of the State of Delaware, do hereby make this Certificate of Designation and do hereby state and certify that, pursuant to the authority expressly vested in the Board of Directors of the Corporation by the Certificate of Incorporation of the Corporation, the Board of Directors at a meeting held on July 20, 1998, unanimously adopted the following resolutions providing for the issuance of a series of Preferred Stock designated as the 12% Series C Senior Redeemable Preferred Stock: RESOLVED, that the Board of Directors of the Corporation, pursuant to the authority expressly vested in it by the Certificate of Incorporation, does hereby provide for the issue of a series of the Corporation's Preferred Stock, par value of $.01 per share, and does hereby fix and herein state the preferences and relative and other special rights and the qualifications, limitations and restrictions thereof, as follows (all terms used herein that are defined in the Certificate of Incorporation shall have the meanings provided therein): 1. Designation and Amount. There shall be a series of Preferred Stock designated as "12% Series C Senior Redeemable Preferred Stock" ("Series C Preferred") with a stated value of $10,000 per share (as compounded pursuant to Section 2, the "Stated Value"), and the number of shares constituting such series shall initially be 1,000. 2. Dividends. (a) The holders of shares of Series C Preferred shall be entitled to receive quarterly, cumulative dividends (the "Dividends") at an annual rate per share equal to 12% of the Stated Value of each such share (as adjusted pursuant to Section 6, the "Dividend Rate") on September 30, December 31, March 31 and June 30 of each fiscal year of the Corporation (each, a "Payment Date"), payable beginning on September 30, 1998. From the date of the filing of this Certificate until the date 18 months thereafter (the "Accrual Period"), the Corporation shall have the option to either pay the Dividends as they become payable or permit them to accrue; provided, however, that following the Accrual Period the Corporation shall pay the Dividends that accrue after the Accrual Period, as such Dividends accrue. Any Dividends which accrue during the Accrual Period and are not paid during the Accrual Period shall continue to be accrued Dividends and shall be paid by the Corporation upon redemption of the Series C Preferred. (b) During any period in which an Event of Default exists under the Loan Agreement (or any refinancing or full or partial replacement thereof ) (the "Senior Lending Facilities") or would exist under the Senior Lending Facilities after giving effect to the payment of any Dividends (a "Default Period"), the Corporation shall have the option of permitting any Dividends which become payable during such Default Period to accrue; provided, however, that any Dividends which are permitted to accrue during such Default Period shall be paid by the Corporation on the earliest to occur of (i) the first Payment Date following the termination of such Default Period, or (ii) redemption of the Series C Preferred. (c) All Dividends which accrue during the Accrual Period and are not paid during the Accrual Period, or which are permitted to accrue and are not paid during any Default Period, shall, until such Dividends are paid, be compounded with and included as part of the Stated Value of the respective shares of Series C Preferred as to which such Dividends were unpaid, and Dividends shall be paid thereon in accordance with this Section 2. 3. Preference on Liquidation or Sale. (a) In the event of any sale, liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts of the Corporation, the holders of Series C Preferred shall be entitled to receive, in preference to all shares of any class, series or issue of capital stock of the Corporation whether already issued or issued after the date of filing of this Certificate (the "Subordinated Stock"), an amount in cash for each share of Series C Preferred equal to (i) the Stated Value of such share of Series C Preferred, plus (ii) all accrued and unpaid Dividends with respect to such share which have not already been included in the Stated Value of such share pursuant to Section 2 of this Certificate (collectively, and with respect to a share of Series C Preferred, the "Liquidation Preference"), before any distribution shall be made in respect of the Subordinated Stock. If upon any sale, liquidation, dissolution or winding up of the affairs of the Corporation, the assets distributable among the holders of Series C Preferred shall be insufficient to permit the payment in full of the Liquidation Preference to all the holders of the then outstanding shares of Series C Preferred, then the entire assets of the Corporation thus distributable shall be distributed ratably among the holders of the Series C Preferred in proportion to the respective aggregate amounts otherwise payable with respect thereto. For purposes of this Certificate, a "sale, liquidation, dissolution or winding up of the affairs of the Corporation" shall include without limitation a Change of Control (as defined below). (b) For purposes of this Certificate, "Change of Control" means (A) any event or series of events by which any person, entity or group obtains a majority of the voting securities or equity interest of the Corporation; (B) the merger, consolidation, reorganization, recapitalization, dissolution, liquidation or winding up of the Corporation if as a result the then-current stockholders no longer own more than 50% of the voting securities or other equity interest of the Corporation; (C) any sale, lease, exchange or other transfer of all, or substantially all, of the assets of the Corporation; or (D) the adoption of a plan leading to the sale, liquidation, dissolution or winding up of the affairs of the Corporation. 4. Redemption. (a) The Corporation shall redeem, at the redemption price set forth in Section 4(b), (c), (d) or (e), as applicable, all of the outstanding shares of Series C Preferred at the earliest to occur of (i) the closing of a Qualified Initial Public Offering (as defined below), (ii) the sale, liquidation, dissolution or winding up of the affairs of the Corporation (including without limitation a Change of Control), and (iii) the third anniversary of the date of the filing of this Certificate. In addition, at the option of holders of a majority of the outstanding Series C Preferred, the Corporation shall redeem shares of Series C Preferred in accordance with the provisions of Section 6 hereof. For purposes of this Certificate, "Qualified Initial Public Offering" means the first offer and sale to the public by the Corporation of shares of any class of the Corporation's capital stock, pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission; provided, however, that the proceeds of the shares issued and sold by the Corporation (net of underwriting commissions and discounts) are at least $40,000,000 in the aggregate. (b) Upon redemption of the Series C Preferred pursuant to Section 4(a)(i), the Corporation shall pay to the holders of the Series C Preferred as a group an aggregate redemption price equal to: (i) the product of (1) the Liquidation Preference, times (2) the number of shares of Series C Preferred to be redeemed, plus (ii) a redemption dividend equal to the product of (1) the public offering price per share of capital stock of the Corporation in the Qualified Initial Public Offering (the "Qualified IPO Price"), minus the Deduction Price, times (2) the Multiplier. The redemption dividend payable pursuant to Section 4(b)(ii) may be paid, at the Corporation's option, in either (A) cash, or (B) Common Stock valued at the Qualified IPO Price. (c) Upon a redemption of the Series C Preferred pursuant to Section 4(a)(ii) in connection with a distribution of all or substantially all of the remaining assets and other proceeds of the Corporation among the stockholders of the Corporation, the Corporation shall pay to the holders of the Series C Preferred as a group an aggregate redemption price equal to: (i) the product of (1) the Liquidation Preference, times (2) the number of shares of Series C Preferred to be redeemed, plus (ii) a redemption dividend equal to the product of (1) all assets and other proceeds distributed in respect of each share of Common Stock following such sale, liquidation, dissolution or winding up of the affairs of the Corporation, minus the Deduction Price, times (2) the Multiplier. The redemption dividend payable pursuant to Section 4(b)(ii) shall be paid in whatever assets or other proceeds of the Corporation are distributed generally to the other holders of Common Stock of the Corporation in such sale, liquidation, dissolution or winding up. (d) Upon redemption of the Series C Preferred pursuant to Section 4(a)(iii), Section 6 or a redemption pursuant to Section 4(a)(ii) which is not in connection with a distribution of all or substantially all of the remaining assets and other proceeds of the Corporation among the stockholders of the Corporation, the Corporation shall pay to the holders of the Series C Preferred as a group an aggregate redemption price equal to: (i) the product of (1) the Liquidation Preference, times (2) the number of shares of Series C Preferred to be redeemed, plus (ii) a redemption dividend equal to the product of (1) the Fair Market Value per share of Common Stock, minus the Deduction Price, times (2) the Multiplier. The redemption dividend payable pursuant to Section 4(d)(ii) may be paid, at the Corporation's option, in either (A) cash, or (B) Common Stock (valued at Fair Market Value). (e) In the event the Corporation has not redeemed all of the outstanding shares of Series C Preferred by the close of business on the third anniversary of the date of the filing of this Certificate, the Corporation shall immediately redeem all outstanding shares of Series C Preferred and shall pay to the holders of the Series C Preferred as a group an aggregate redemption price equal to: (i) the product of (1) the Liquidation Preference, times (2) the number of shares of Series C Preferred to be redeemed, plus (ii) a redemption dividend equal to the product of (1) the Fair Market Value per share of Common Stock, minus the product of (x) the Deduction Price, times (y) .10; times (2) the Multiplier. The redemption dividend payable pursuant to Section 4(e)(ii) may be paid, at the Corporation's option, in either (A) cash, or (B) Common Stock (valued at Fair Market Value). (f) Notice of any redemption of shares of Series C Preferred shall be made by means of certified mail return receipt requested, addressed to the holders identified in the records of the Corporation (the "Registered Holders") of the Series C Preferred to be redeemed, at their respective addresses then appearing on the books of the Corporation, not less than fifteen (15) nor more than sixty (60) days prior to the date fixed for such redemption (herein referred to as the "Redemption Date"); provided, however, that notwithstanding the foregoing, upon a redemption pursuant to Section 4(a)(ii), the Corporation shall deliver such notice as soon as possible after the Corporation has knowledge of the approximate date of such sale, liquidation, dissolution or winding up of the affairs of the Corporation. Each such notice shall specify (i) the Redemption Date, (ii) the applicable redemption price, (iii) the place for payment and for delivering the stock certificate(s) and transfer instrument(s) in order to collect the applicable redemption price, and (iv) the shares of Series C Preferred to be redeemed. (g) From and after the Redemption Date, each Registered Holder of any shares of Series C Preferred to be redeemed pursuant to this Section 4 shall be entitled to receive payment of the applicable redemption price as soon as such holder shall cause to be delivered to the Corporation (i) the certificate(s) representing such Series C Preferred and (ii) transfer instrument(s) sufficient to transfer such Series C Preferred to the Corporation free of any adverse interest. (h) At the close of business on the Redemption Date for any Series C Preferred, such stock shall be deemed to cease to be outstanding and all rights of any person other than the Corporation in such stock shall be extinguished on the Redemption Date for such stock except for the right to receive the applicable redemption price, without interest, for such stock in accordance with the provisions of this Section 4, subject to applicable escheat laws. (i) Any redemption dividend to be paid in respect of any shares of Series C Preferred pursuant to this Section 4 shall be paid to each Registered Holder pro rata based on the number of shares of Series C Preferred of such Registered Holder to be redeemed. Any Liquidation Preference to be paid pursuant to this Section 4 shall be paid to each Registered Holder based on the Liquidation Preferences of the shares of Series C Preferred of such Registered Holder to be redeemed. 5. Financial Covenants (a) Net Worth. The Corporation shall not, and shall cause each of its Subsidiaries not to, incur any Indebtedness if, immediately prior to such incurrence or immediately after giving effect to such incurrence, the Net Worth of the Corporation and all of its Subsidiaries on a consolidated basis is or would be less than the sum of (x) $26,125,000, plus (y) effective upon the closing of any issuance of equity securities of the Corporation, seventy five percent (75%) of the amount by which the Corporation's shareholders' equity is increased as a result of such issuance of equity securities, plus (z) effective January 1 of each year, an amount equal to the greater of (A) zero, and (B) seventy percent (70%) of Net Income of the Corporation and all of its Subsidiaries on a consolidated basis for the immediately preceding fiscal year. (b) Leverage Ratio. (i) During each applicable period, the Corporation shall not, and shall cause each of its Subsidiaries not to incur any Indebtedness if, immediately prior to such incurrence or immediately after giving effect to such incurrence, the Leverage Ratio of the Corporation and all of its Subsidiaries on a consolidated basis is or would be greater than the ratio set forth below opposite the applicable period: Applicable Period Ratio ----------------- ----- Date of filing of this Certificate - 12/31/98 6.25:1.0 01/01/99 - 06/30/99 6.00:1.0 At all times thereafter 5.75:1.0 (ii) Notwithstanding the foregoing, the Company may (A) incur aggregate Indebtedness under the Loan Agreement of up to, but not exceeding, $100 million, and (B) in the event that, other than as a result of violating any of the provisions set forth in Section 5(b)(i), the Leverage Ratio of the Corporation and all of its Subsidiaries on a consolidated basis exceeds the maximum ratio set forth for the applicable period in Section 5(b)(i), the Corporation or any of its Subsidiaries may incur Indebtedness ("Additional Indebtedness") in addition to the Indebtedness permitted under Section 5(b)(ii)(A), if and only if the incurrence of such Additional Indebtedness combined with the application of the proceeds of such Additional Indebtedness reduces the Leverage Ratio of the Corporation and all of its Subsidiaries on a consolidated basis. (c) Interest Coverage Ratio. During each applicable period, the Corporation shall not, and shall cause each of its Subsidiaries not to incur any Indebtedness if, immediately prior to such incurrence or immediately after giving effect to such incurrence, the Interest Coverage Ratio of the Corporation and all of its Subsidiaries on a consolidated basis is or would be less than the ratio set forth below opposite the applicable period. Applicable Period Ratio ----------------- ------ Date of filing of this Certificate - 12/31/98 1.75:1.0 01/01/99 - 06/30/99 2.00:1.0 07/01/99 - 12/31/00 2.25:1.0 At all times thereafter 2.50:1.0 6. Events of Noncompliance. (a) An Event of Noncompliance shall be deemed to have occurred if: (i) the Corporation or any Subsidiary defaults in the payment of principal of or interest on any obligation for money borrowed having a principal amount outstanding in excess of $5 million (a "Material Obligation"), beyond any period of grace provided with respect thereto, or defaults in the performance of any other agreement, term or condition contained in any agreement under which any Material Obligation is created (or if any other default under any such agreement shall occur and be continuing) and as a result of such default such Material Obligation has become, or the holder or holders of such Material Obligation have caused such Material Obligation to become due prior to its stated maturity; (ii) the Corporation or any Subsidiary breaches any of the provisions set forth in Section 5(b) hereof; (iii) the Corporation (i) discontinues the conduct of its business; (ii) applies for or consents to the imposition of any Insolvency Relief; (iii) voluntarily commences or consents to the commencement of an Insolvency Proceeding; (iv) files an answer admitting the material allegations of any involuntary commencement of an Insolvency Proceeding; (v) makes a general assignment for the benefit of its creditors; or (vi) is unable or admits in writing its inability to pay its debts as they become due; (iv) any Insolvency Order is entered against the Corporation and such Insolvency Order is not dismissed within 30 calendar days of its entry; or (v) within one year following the date of filing of this Certificate, the Corporation has not entered into a registration rights agreement granting to each of the Registered Holders of Series C Preferred (i) at least one demand registration right which is at least as favorable as the most favorable demand registration right granted to any other holder of securities of the Corporation, and (ii) piggyback, cutback and other registration rights at least as favorable as, and ranking at least pari passu in priority with, the most favorable piggyback, cutback and other registration rights granted to any other holder of securities of the Corporation. (b) If and whenever an Event of Noncompliance shall occur and be continuing, the holders of a majority of the outstanding Series C Preferred shall have the right, at their sole discretion, to cause the Corporation to redeem all or any part of the shares of Series C Preferred then outstanding at a price per share equal to the redemption price set forth in Section 4(d). The holders of a majority of the outstanding Series C Preferred shall exercise this right to redemption under this Section 5(b) by delivering to the Corporation written notice of the election of such right, specifying the number of shares to be redeemed. The redemption of any shares of Series C Preferred pursuant to this Section shall occur in accordance with the redemption procedures set forth in Section 4 hereof. Unless otherwise determined by the holders of a majority of the outstanding Series C Preferred, any redemption of less than all outstanding shares of Series C Preferred shall be pro rata in proportion to each Registered Holder's ownership percentage of all outstanding Series C Preferred. 7. Penalty Events. Upon the occurrence of any of the following events (each, a "Penalty Event") and until the first date on which such Penalty Event has been remedied or waived in writing by the holders of a majority of the outstanding Series C Preferred and no other Penalty Event is continuing unremedied or unwaived, the Dividend Rate shall be equal to an annual rate of 15% of the Stated Value of each share of Series C Preferred: (a) the Corporation fails for any reason to pay when due the full amount of Dividends then calculated as payable on the shares of Series C Preferred; (b) the Corporation or any Subsidiary defaults in the payment of principal of or interest on any Material Obligation, beyond any period of grace provided with respect thereto, or defaults in the performance of any other agreement, term or condition contained in any agreement under which any such Material Obligation is created (or if any other default under any such agreement shall occur and be continuing) if the effect of such default is to cause, or to permit the holder or holders of such Material Obligation (or a trustee on behalf of such holder or holders) to cause such Material Obligation to become due prior to its stated maturity; (c) the Corporation or any Subsidiary breaches any of the provisions set forth in Sections 5(a) or 5(c) hereof; or (d) the Corporation fails to redeem the Series C Preferred as required pursuant to Section 4(a)(i), 4(a)(ii) or Section 6 hereof. 8. Reissuance of Shares. Any shares of the Series C Preferred which are redeemed or otherwise acquired by the Corporation shall assume the status of authorized but unissued Preferred Stock undesignated as to series, subject to later issuance, and shall not be reissued as shares of Series C Preferred. 9. Preemptive Rights. No holder of shares of Series C Preferred solely by reason of holding such shares shall have any preemptive or preferential right to purchase or subscribe to any securities of the Corporation, now or hereafter to be authorized. 10. Voting Rights. Except as specified herein, the holders of the Series C Preferred shall be entitled to vote as a separate class only when required by applicable law to do so. So long as any shares of Series C Preferred remain outstanding, the Corporation shall not, without the affirmative vote or consent of the holders of at least a majority of the outstanding shares of Series C Preferred voting separately as class: (a) issue any equity securities of a class or series senior to or on parity with the Series C Preferred as to payment of dividends or as to payments on the sale, dissolution, liquidation or winding-up of the affairs of the Corporation, or authorize or issue equity securities of any class or series or any bonds, debentures, notes or other obligations convertible into or exchangeable for, or having option rights to purchase, any shares of equity securities of the Corporation senior to or on parity with the Series C Preferred as to payment of dividends or as to payments on the sale, dissolution, liquidation or winding-up of the affairs of the Corporation; (b) amend the certificate of incorporation of the Corporation; (c) alter, impair, reduce or affect in any manner the rights, preferences, privileges or powers of, or the restrictions provided for the benefit of, the Series C Preferred; or (d) enter into or engage in any business activities or operations other than those directly related to the Corporation's present business. 11. Board of Director Rights. (a) For as long as any shares of Series C Preferred remain outstanding, the holders of a majority of the outstanding Series C Preferred shall have the right, at their option, to exercise both of the following rights: (i) the right to have a designated representative (x) receive notice of all meetings of the Corporation's Board of Directors, (y) attend all meetings of the Board of Directors in a non-voting, non-participating observer capacity, and (z) receive copies of all notices, minutes, consents, and all other materials provided by the Corporation to the Board of Directors; and (ii) the right to elect one member of the Board of Directors of the Corporation. (b) Only holders of the Series C Preferred (to the extent they are entitled to vote thereon) shall be entitled to vote on the removal of any director elected by the holders of Series C Preferred, and exercise of such right of removal shall be determined by vote of the holders of a majority of the outstanding Series C Preferred. Any vacancy in the office of a director created by the death, resignation or removal of a director elected by the holders of the Series C Preferred may be filled only by a vote of holders of a majority of the outstanding Series C Preferred (to the extent they are entitled to vote thereon). Any director elected by the holders of the Series C Preferred shall serve until the annual meeting at which time such director's term expires and until his or her successor has been elected and has qualified, unless removed and replaced pursuant to this subsection 11(b). 12. Subordination of Right of Redemption. The redemption rights in respect of the Series C Preferred set forth hereunder shall be subordinate to any rights, privileges and entitlements held by the Lenders under the Loan Agreement and redemption of the Series C Preferred may not be made if there exists, or if such redemption would result in, a Default or Event of Default; provided, however, that notwithstanding the foregoing, as long as (i) no Default or Event of Default has occurred and is continuing under the Loan Agreement or would occur after giving effect to such redemption, and (ii) no Obligations have been accelerated as a result of an Event of Default and remain due and payable under the Loan Agreement, the Corporation shall enforce the redemption provisions set forth hereunder; provided further, that nothing set forth herein shall prohibit the holders of the Series C Preferred from seeking appropriate remedies from the Company in the event the Series C Preferred is not redeemed or dividends are not paid in the respect of the Series C Preferred in accordance with this Certificate. 13. Certain Definitions. When used herein, the following capitalized terms shall have the following respective meanings: (a) "Deduction Price" means $4.63, as adjusted pursuant to Section 14. (b) "Default" has the meaning set forth in the Loan Agreement as in effect on the date hereof, without giving effect to any subsequent amendments or modifications of Article 8 or 9 of the Loan Agreement after the date of filing of this Certificate. (c) "Event of Default" has the meaning set forth in the Loan Agreement as in effect on the date hereof, without giving effect to any subsequent amendments or modifications of Article 8 or 9 of the Loan Agreement after the date of filing of this Certificate. (d) "Fair Market Value" as of a particular date, shall be determined by a recognized appraisal or investment firm with experience in making determinations of value of the type required to be made under this Certificate, selected jointly by the Corporation and the holders of a majority of the outstanding Series C Preferred. (e) "Indebtedness" has the meaning set forth in the Loan Agreement as in effect on the date of filing of this Certificate; provided, however, that for purposes of this Certificate the term "Indebtedness" shall not include purchase money Indebtedness or unsecured Indebtedness, in an aggregate principal amount which, when aggregated with the aggregate outstanding events (each, a "Penalty Event") and until the first date on which such Penalty Event has been remedied or waived in writing by the holders of a majority of the outstanding Series C Preferred and no other Penalty Event is continuing unremedied or unwaived, the Dividend Rate shall be equal to an annual rate of 15% of the Stated Value of each share of Series C Preferred: (a) the Corporation fails for any reason to pay when due the full r bankruptcy, insolvency, conservatorship, receivership or other similar debtor's relief. (h) "Insolvency Relief" means discharge of indebtedness, liquidation, reorganization or arrangement, appointment of a receiver, trustee, conservator, custodian or liquidator or the granting of any stay or restraining order against creditors under any Insolvency Law or other similar debtor's relief under any Insolvency Law. (i) "Insolvency Order" means any order, judgment or decree entered in any Insolvency Proceeding granting any Insolvency Relief. (j) "Interest Coverage Ratio" has the meaning set forth in the Loan Agreement as of the date of filing of this Certificate. (k) "Lenders" has the meaning set forth in the Loan Agreement as of the date of filing of this Certificate. (l) "Leverage Ratio" has the meaning set forth in the Loan Agreement as of the date of filing of this Certificate. (m) "Loan Agreement" means the Amended and Restated Loan and Security Agreement dated as of March 31, 1998, by and among the Corporation, the Lenders named therein, Creditanstalt Corporate Finance, Inc. (as the LC Issuer), Credit Agricole Indosuez (as Co-Agent) and Creditanstalt Corporate Finance, Inc. (as the Collateral Agent and Administrative Agent), as amended from time to time. (n) "Multiplier" means 678,572, as adjusted pursuant to Section 14. (o) "Net Income" has the meaning set forth in the Loan Agreement as of the date of filing of this Certificate. (p) "Net Worth" has the meaning set forth in the Loan Agreement as of the date of filing of this Certificate. (q) "Obligations" has the meaning set forth in the Loan Agreement. (r) "Series B Agreement" means the Second Amended and Restated Preferred Stock and Warrant Purchase Agreement dated as of March 31, 1998, as amended, among the Corporation, Creditanstalt, FF-ITP, L.P., Indosuez IT Partners, Wachovia Capital Associates, Inc. and the other signatories thereto. (s) "Subordinated Debt" has the meaning set forth in the Loan Agreement. (t) "Subsidiaries" means each corporation or other entity in which the Corporation owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests of such corporation or entity. 14. Anti-dilution Provisions. The Corporation hereby agrees to apply to the Deduction Price and the Multiplier the most favorable anti-dilution provisions (including without limitation adjustments related to stock splits, stock consolidations and similar events) heretofore granted to any holder of Series B Preferred Stock of the Corporation with respect to the Series B Preferred (including without limitation the anti-dilution provisions set forth in Article 4(B)(5) of the Certificate of Incorporation of the Corporation, as amended and in effect as of the date of filing of this Certificate), and to adjust the Deduction Price and the Multiplier as necessary to give effect to any such anti-dilution provision. RESOLVED FURTHER, that, before the Corporation shall issue any shares of the Series C Preferred, a certificate pursuant to Section 151 of the General Corporation Law of the State of Delaware shall be made, executed, acknowledged, filed and recorded in accordance with the provisions of said Section 151; and that the proper officers of the Corporation are hereby authorized and directed to do all acts and things which may be necessary or proper in their opinion to carry into effect the purposes and intent of this and the foregoing resolutions. IN WITNESS WHEREOF, this Certificate of Designation has been made under the seal of the Corporation and the hands of the undersigned, said Daniel F. Klein, Chairman of the Board, and Jamie Blech, Secretary, respectively, of the Corporation, this 27th day of July, 1998. IT PARTNERS, INC. By: /s/ Daniel J. Klein -------------------- Daniel J. Klein Chairman of the Board ATTEST: /s/ Jamie E. Blech - -------------------- Jamie E. Blech Secretary EX-4.12 9 WACHOVIA STOCK PURCHASE AGREEMENT EXECUTION COPY ---------------------------------------------------------------------------- 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JULY 31, 1998 BY AND BETWEEN IT PARTNERS, INC., as the Company AND WACHOVIA CAPITAL ASSOCIATES, INC. as the Purchaser ---------------------------------------------------------------------------- TABLE OF CONTENTS Page SECTION 1 Definitions 1 1.1. Defined Terms 1 1.2. 3 SECTION 2 Authorization and Sale of the Company's Stock 4 2.1. Authorization of Series C Preferred and Common Stock 4 2.2. Sale and Purchase of Series C Preferred 4 2.3. Use of Proceeds 4 SECTION 3 Closing Date; Delivery 4 3.1. Closing Date 4 3.2. Delivery 4 SECTION 4 Representations and Warranties of the Company 5 4.1. Organization, Good Standing and Qualification 5 4.2. Capitalization 5 4.3. Subsidiaries 6 4.4. Partnerships, Joint Ventures 7 4.5. Authorization 7 4.6. Governmental Consents 7 4.7. Conformity with Law; Absence of Litigation 7 4.8. Insurance 8 4.9. Adequacy of Intangible Assets 8 4.10. Compliance with Other Instruments and Legal Requirements 8 4.11. Material Agreements; Action 9 4.12. Registration Rights 9 4.13. Corporate Documents 9 4.14. Real Property 9 4.15. Tangible Personal Property 10 4.16. Environmental Matters 11 4.17. Company SEC Reports and Financial Statements 12 4.18. Changes 13 4.19. Employee Benefit Plans 13 4.20. Taxes 14 4.21. Labor and Employment Matters 14 4.22. No Pending Transactions 15 4.23. Disclosure 15 4.24. Brokers' Fees 15 4.25. Not an Investment Company 15 4.26. Real Property Holding Company 15 SECTION 5 Representations and Warranties of the Purchaser 16 5.1. Accredited Investor; Experience; Risk 16 5.2. Authorization 16 5.3. Governmental Consents 17 5.4. Organization, Good Standing and Qualification 17 SECTION 6 Conditions to Closing of Purchaser 17 6.1. Representations and Warranties Correct 17 6.2. Covenants 17 6.4. No Material Adverse Change 18 6.5. Series C Certificate of Designation 18 6.6. State or Federal Securities Laws 18 6.7. Issuance of Shares 18 6.8. Officer's Certificate 18 6.10. Required Consents 18 6.11. Corporate Documents 18 6.12. Origination Fee 19 SECTION 7 Conditions to Closing of the Company 19 7.1. Representations 19 7.2. Purchase Price 19 7.3. Certificate 19 7.4. State or Federal Securities Laws 19 SECTION 8 Covenants of the Company 20 8.1. Information 20 8.2. Regulatory Matters 21 8.3. Access 21 8.4. Confidentiality 21 8.5 Publicity 22 8.6 IRC Section 1202 22 8.7 Reservation of Common Stock 22 8.8 Registration Rights 22 8.9 Loan Agreement Provisions 22 SECTION 9 Miscellaneous 23 9.1 Amendment; Waiver 23 9.2 Notices 23 9.3 Severability 24 9.4 Successors and Assigns 24 9.5 Survival of Representations, Warranties and Covenants 24 9.6 Entire Agreement 24 9.7 Choice of Law 25 9.8 Counterparts 25 9.9 Costs and Expenses 25 9.10 No Third-Party Beneficiaries 25 9.11 Indemnification 25 9.12. Survival 25 9.13 Indemnification Procedure 26 9.14 Maximum Liability 26 SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE 27 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT This 12 % SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT, dated as of July 31,1998 (this "Agreement"), is entered into by and between IT Partners, Inc., a Delaware corporation (the "Company") and WACHOVIA CAPITAL ASSOCIATES, INC., a Georgia corporation (the "Purchaser"). W I T N E S S E T H WHEREAS, the Company desires to issue and sell, and the Purchaser desires to purchase from the Company, shares of the Company's 12% Series C Senior Redeemable Preferred Stock, par value $.01 per share, as adjusted (the "Series C Preferred"), in the amounts and on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties hereto agree as follows: SECTION 1 Definitions 1.1 Defined Terms. The following terms are defined as follows: "Affiliate" means, with respect to any Person, (i) any Person that holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of voting securities or other voting interests representing at least 5% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 5% of the outstanding equity securities or equity interests in a Person, (ii) any brother, sister, parent, child or spouse of such Person or any Person described in clause (i), and (iii) any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such entity. "Applicable Laws" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Code" means the Internal Revenue Code of 1986 (or any successor thereto), as amended from time to time. "Common Stock" means the common stock, par value $.01 per share, of the Company. "Environmental Law" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "ERISA" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "ERISA Affiliate" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Event of Default" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles. "Hazardous Substances" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Knowledge" or derivations thereof shall mean the knowledge of the executive officers of the Company and of the Presidents of each Subsidiary, and, with respect to Sections 4.19 and 4.21, each person who conducts human resource and employee benefits management functions for the Company or any Subsidiary, whether or not an officer of the Company or such Subsidiary. "Lien" means any lien, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, transfer restriction under any shareholder or similar agreement, encumbrance or any other restriction or limitation whatsoever. "Loan Agreement" means the Amended and Restated Loan and Security Agreement dated as of March 31, 1998, by and among the Company, the Lenders named therein, Creditanstalt Corporate Finance, Inc. (as the LC Issuer), Credit Agricole Indosuez (as Co-Agent) and Creditanstalt Corporate Finance, Inc. (as the Collateral Agent and Administrative Agent), as amended from time to time. "Multiemployer Plan" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Obligations" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Origination Fee" means an amount equal to one and one-half percent (1 1/2%) of the Purchase Price, or $45,000. "Permits" means any approvals, authorizations, consents, licenses, permits or certificates. "Person" means an individual, partnership, limited liability company, corporation, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof. "Plan" shall have the meaning set forth in the Loan Agreement as in effect on the date hereof. "Preferred Stock" means the Series A Preferred Stock of the Company, par value $.01 per share, the Series B Preferred Stock of the Company, par value $.01 per share, and the Series C Preferred. "Qualified Initial Public Offering" means the first offer and sale to the public by the Company of shares of any class of the Company's capital stock, pursuant to a registration statement that has been declared effective by the Securities and Exchange Commission; provided, however, that the proceeds (net of underwriting discounts and commissions) of the shares issued and sold by the Company are at least $40,000,000 in the aggregate. "Release" means any release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal or leaching into the indoor or outdoor environment, or into or out of any property; "SEC" means the United States Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiaries" means each corporation or other entity in which the Company owns or controls, directly or indirectly, capital stock or other equity interests representing at least 50% of the outstanding voting stock or other equity interests of such corporation or entity. "Trademark License" shall mean any written agreement granting any right to use any Trademark or trademark registration. "Trademarks" shall mean all trademarks (including service marks and trade names, whether registered or at common law), registrations and applications therefor, and all renewals thereof. "Transaction Documents" shall mean this Agreement and each agreement, document, certificate or instrument adopted, entered into or delivered as contemplated herein, including without limitation the Series C Certificate of Designation. 1.2 Any additional capitalized terms shall have the meanings assigned to them in the text of this Agreement. Terms defined in the singular shall have a comparable meaning when used in the plural and vice versa. SECTION 2 Authorization and Sale of the Company's Stock 2.1 Authorization of Series C Preferred and Common Stock. At Closing, the Company will have authorized the issuance and sale to the Purchaser of 300 shares of Series C Preferred, having the stated value, rights, preferences, privileges and restrictions set forth in the Certificate of Designation attached to this Agreement as Exhibit A (the "Series C Certificate of Designation"). 2.2 Sale and Purchase of Series C Preferred. In reliance on the representations and warranties of the Company contained herein and subject to the terms and conditions hereof, at Closing, the Purchaser agrees to purchase from the Company, and the Company agrees to sell to the Purchaser 300 shares of Series C Preferred for an aggregate purchase price of THREE MILLION DOLLARS ($3,000,000) (the "Purchase Price"). 2.3 Use of Proceeds. The Company agrees to use the full proceeds from the sale of the Series C Preferred (i) to continue the Company's acquisition program, (ii) to expand the Company's credit facilities, and (iii) for general corporate purposes. SECTION 3 Closing Date; Delivery 3.1 Closing Date. The closing of the purchase and sale of the Series C Preferred (the "Closing") shall be held at the offices of Swidler & Berlin, Chartered, 3000 K Street. N.W., Washington, D.C. on July 31, 1998, or on such other date or at such other place as the Purchaser and the Company shall mutually agree (the date of the Closing being referred to herein as the "Closing Date"). 3.2 Delivery. At the Closing, the Company shall deliver to the Purchaser (i) certificates evidencing the shares of Series C Preferred being purchased by it registered in the Purchaser's name, and (ii) the Origination Fee (payable by wire transfer of immediately available funds), against delivery to the Company of the Purchase Price (payable by wire transfer of immediately available funds). The parties shall also deliver the other documents and instruments required under this Agreement to be delivered at or prior to Closing. SECTION 4 Representations and Warranties of the Company The Company hereby represents and warrants to the Purchaser as follows: 4.1 Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in all jurisdictions where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to do so would not be material to the Company. Each of the Company and its Subsidiaries has the corporate power and authority and is in possession of all material franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders to own, lease and operate its properties and to carry on its business as now being conducted. 4.2 Capitalization. (a) The authorized capital stock of the Company consists of 26,000,000 shares, of which 20,000,000 shares are common stock, par value $.01 per share ("Common Stock"). As of the date hereof, there are 8,279,658 shares of Common Stock issued and outstanding. No shares of Common Stock are held in treasury. There are 6,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"), of which (i) 600,000 shares have been designated as Series A Preferred Stock, (ii) 5,000,000 shares have been designated as Series B Preferred Stock and (iii) 1,000 shares have been designated as Series C Preferred. As of the date hereof, there are 347,230 shares of Series A Preferred Stock issued and outstanding, 1,387,448 shares of Series B Preferred Stock issued and outstanding, and 700 shares of Series C Preferred issued and outstanding. Except as set forth above, there are no shares of capital stock of the Company authorized or, as of the date hereof, issued or outstanding. The issued and outstanding shares of capital stock of the Company are duly authorized, validly issued, fully paid and non- assessable. (b) Except as listed on Schedule 4.2, there are outstanding (a) no shares of capital stock or other voting stock of the Company, (b) no securities of the Company, any Subsidiary or any Person convertible into or exchangeable for shares of capital stock or voting securities of the Company, (c) no options, warrants or other rights to acquire from the Company or any Subsidiary (including any rights issuable or issued under any shareholder rights plan or similar arrangement), and no obligations, contingent or otherwise, of the Company or any Subsidiary to issue any capital stock, voting securities or securities convertible into or exchangeable for, capital stock or voting securities of the Company or any Subsidiary, (d) no equity equivalent in the earnings or ownership of the Company, any Subsidiary or any Person or any similar rights to share earnings or ownership and (e) no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any of its securities or to make any investment (by loan, capital contribution or otherwise) in any entity or Person. Except as set forth on Schedule 4.2, the Company has no employee stock purchase plans, stock option plans or other form of company benefit plan which provides for the issuance, exchange or distribution of capital stock. All outstanding options, rights and warrants have been duly and validly issued and are in full force and effect. All shares of capital stock subject to issuance upon exercise of any options, rights or warrants or otherwise, upon issuance pursuant to the instruments under which they are issuable, shall be duly authorized, validly issued, fully paid for and non-assessable and, except as set forth on Schedule 4.2, free of all preemptive rights. No outstanding options, warrants or other securities exercisable for or convertible into shares of capital stock of the Company require anti-dilution adjustments by reason of the consummation of the transactions contemplated hereby. (c) The Company has reserved for issuance 9,075,004 shares of Common Stock upon exercise or conversion of currently outstanding shares of Preferred Stock and rights, options, warrants and other convertible securities. The shares of Series C Preferred to be issued pursuant to this Agreement, upon delivery to the Purchaser of certificates therefor against payment in accordance with the terms of this Agreement, and the shares of Common Stock issuable upon redemption of the Series C Preferred, upon delivery to the Purchaser of certificates therefor in accordance with the provisions of the Series C Certificate of Designation, (i) will be validly issued, fully paid and non-assessable, (ii) will be free and clear of all Liens other than restrictions on transfers imposed by federal or state securities laws and by this Agreement and the other Transaction Documents, and (iii) assuming that the representations of the Purchaser in Section 5 hereof are true and correct, will be issued in compliance with all applicable federal and state securities laws. The Company has reserved for issuance 678,572 shares of Common Stock upon redemption of the Series C Preferred. 4.3 Subsidiaries. Schedule 4.3 sets forth a complete and accurate list of all Subsidiaries of the Company, showing (as to each such Subsidiary) the date of its incorporation, the jurisdiction of its incorporation, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders of such Subsidiaries and the number and percentage of the outstanding shares of each such class owned, directly or indirectly, by all such stockholders, including the Company. Except as set forth on Schedule 4.3, at Closing, all of the outstanding capital stock of, or other ownership interests in, each Subsidiary, is owned by the Company, directly or indirectly, free and clear of any Lien or any other limitation or limitation or restriction (including restrictions on the right to vote). All outstanding shares of the capital stock of the Company and any Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and are free of any preemptive rights. There are no outstanding securities of any Subsidiary convertible into or evidencing the right to purchase or subscribe for any shares of capital stock of any Subsidiary, there are no outstanding or authorized options, warrants, calls, subscriptions, rights, commitments or any other agreements of any character obligating any Subsidiary to issue any shares of its capital stock or any securities convertible into or evidencing the right to purchase or subscribe for any shares of such stock, and, except as set forth on Schedule 4.3, there are no agreements or understandings with respect to the voting, sale, transfer or registration of any shares of capital stock of any Subsidiary. 4.4 Partnerships, Joint Ventures. Schedule 4.4 sets forth a complete and accurate list of all partnerships, limited partnerships, limited liability companies or joint venture of any kind in which the Company or any Subsidiary holds any interests, showing the date of its incorporation, the jurisdiction of its incorporation, the number of shares of its authorized capital stock, the number and class of shares thereof duly issued and outstanding, the names of all stockholders (or other equity interest holders) of such entity and the number and percentage of the outstanding shares of each such class owned, directly or indirectly, by all such stockholders, including the Company or any Subsidiary. Except as set forth on Schedule 4.4, at Closing, such capital stock of, or other ownership interests in, each entity as set forth in Schedule 4.4 is owned by the Company, directly or indirectly, free and clear of any Lien or any other limitation or restriction (including restrictions on the right to vote). All outstanding shares of the capital stock held by the Company and any Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable and are free of any preemptive rights. Except as set forth on Schedule 4.4, the Company is not a party to, and does not hold, any equity interests in any partnership, limited partnership, limited liability company or other joint venture of any kind. 4.5 Authorization. The Company has all requisite corporate power and authority to execute and deliver the Transaction Documents and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Transaction Documents and the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate, including shareholder (if required), action on the part of the Company. Each Transaction Document to which the Company is a party has been duly and validly executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 4.6 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Company is required in connection with the valid execution and delivery by the Company of the Transaction Documents to which it is a party, or the consummation by the Company of the transactions contemplated by the Transaction Documents to which it is a party, except for filings pursuant to federal or state securities laws and the filing of the Certificate of Designation with the Secretary of State of Delaware. 4.7 Conformity with Law; Absence of Litigation. None of the Company or any of its Subsidiaries has violated any law or regulation or any order of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality having jurisdiction over it which would have a material adverse effect on the Company and the Subsidiaries taken as a whole. Except as set forth on Schedule 4.7, there are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, which would reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. 4.8 Insurance. Schedule 4.8 sets forth a complete and accurate list of all policies of insurance of any kind or nature covering the Company, its Subsidiaries and any of their respective employees, properties or assets, including, without limitation, policies of life, disability, fire, theft, workers compensation, employee fidelity and other casualty and liability insurance. All such policies are in full force and effect. None of the Company or any of its Subsidiaries is in material default of any policies of insurance. 4.9 Adequacy of Intangible Assets. The Company and each of its Subsidiaries possess all intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, and trade names, and all governmental registrations and licenses (collectively, "Intellectual Property") reasonably necessary to conduct the businesses of the Company and each of the Subsidiaries, and all such intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, trade names, licenses and registrations which have been registered with any governmental authority are listed on Schedule 4.9. Since May 1, 1997, neither the Company nor any of the Subsidiaries has received any written communications alleging that the Company or any of its Subsidiaries has violated or, by conducting its business as proposed, would violate any of the Intellectual Property of any other Person, nor does the Company have Knowledge of any such violations. 4.10 Compliance with Other Instruments and Legal Requirements. (a) None of the Company or any of its Subsidiaries is in violation or default of any provisions of its certificate of incorporation, by-laws, or comparable organizational documents. None of the Company or any of its Subsidiaries is in violation or default in any respect under any provision, instrument, judgment, order, writ, decree, contract or agreement to which it is a party or by which it is bound or of any provision of any federal, state or local statute, rule or regulation applicable to the Company or any of its Subsidiaries (including, without limitation, any law, rule or regulation relating to protection of the environment and the maintenance of safe and sanitary premises). The execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time or giving of notice, either a default under or give rise to any obligations under, the certificate of incorporation or by-laws of the Company or any of the Subsidiaries, or any note, bond, mortgage, indenture, lease, license, permit, contract, agreement or other instrument or obligation, decree or order to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary or its properties or assets is or may be bound, or violate any law, order, rule or regulation applicable to the Company or any Subsidiary. Except as set forth on Schedule 4.10 (the "Required Consents"), the execution, delivery and performance of each Transaction Document and the consummation of the transactions contemplated hereby and thereby will not and does not require any consent, waiver or approval by any Person, or constitute an event that will result in the creation of any Lien upon any assets of the Company or any of its Subsidiaries. (b) The Company and its Subsidiaries have all Permits of all Persons required to conduct their respective businesses as currently conducted. (c) The transactions contemplated by this Agreement and the Transaction Documents will not constitute a change of control under any Employee Benefit Plan, rights plan, contract or agreement to which it is a party, or under any law, rule or regulation to which it is subject. 4.11 Material Agreements; Action. Except as set forth on Schedule 4.11, there are no material contracts, agreements, commitments, understandings or proposed transactions, whether written or oral, to which the Company or any of its Subsidiaries is a party or by which any of them or their respective properties or assets are bound that involve or relate to: (i) any of their respective officers, directors, stockholders (or other equity interest holder) or partners or any Affiliate thereof; (ii) the sale of any of the assets of the Company or any of its Subsidiaries other than in the ordinary course of business; (iii) covenants of the Company or any of its Subsidiaries not to compete in any line of business or with any Person in any geographical area or covenants of any other Person not to compete with the Company or any of its Subsidiaries in any line of business or in any geographical area; (iv) the acquisition by the Company or any of its Subsidiaries of any operating business or the capital stock of any other Person; (v) the borrowing of money; (vi) the expenditure of more than $50,000 in the aggregate or the performance by the Company or any Subsidiary extending for a period more than one year from the date hereof, other than in the ordinary course of business, or (vii) the license of any Intellectual Property or other material proprietary right to or from the Company or any of its Subsidiaries. There have been made available to the Purchaser and its representatives true and complete copies of all such agreements. All such agreements are in full force and effect and are the legal, valid and binding obligation of the Company or its Subsidiaries. None of the Company or any of its Subsidiaries is in default under any such agreements nor, to the Knowledge of the Company, is any other party to any such agreements in default thereunder in any respect. 4.12 Registration Rights. Except as set forth on Schedule 4.12, the Company has not granted or agreed to grant any registration rights, including without limitation piggyback registration rights, to any Person. 4.13 Corporate Documents. True and correct copies of the certificate of incorporation and the by-laws of the Company and each of the Subsidiaries, as amended and as are currently in effect, have been delivered to the Purchaser. 4.14 Real Property. (a) Schedule 4.14(a) sets forth a complete list of all real property and interests in real property owned (the "Owned Properties") or leased (as lessee or lessor) (the "Leased Properties") by the Company or any of its Subsidiaries (the Leased Properties together with the Owned Properties, being referred to herein individually as a "Company Property" and collectively as the "Company Properties"). The Company Property constitutes all interests in real property currently used or currently held for use in connection with the businesses of the Company and its Subsidiaries and which are necessary for the continued operation of the businesses of the Company and its Subsidiaries as such businesses are currently conducted. The Company and its Subsidiaries have a valid and enforceable leasehold interest under each of the leases for Leased Property (the "Real Property Leases"), and none of the Company or any of its Subsidiaries has received any written notice of any default or event which, with notice or lapse of time, or both, would constitute a default by the Company or any of its Subsidiaries under any of the Real Property Leases. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Real Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) The Company and its Subsidiaries have all certificates of occupancy and Permits of any Person necessary or useful for the current use and operation of each Company Property, and the Company and its Subsidiaries have fully complied with all conditions of the Permits applicable to them. No default or violation, or event which, with the lapse of time or giving of notice or both would become a default or violation, has occurred in the due observance of any such Permit, which could reasonably be expected to have a material adverse effect on the Company and the Subsidiaries taken as a whole. (c) There does not exist any actual or threatened or contemplated condemnation or eminent domain proceedings that affect any Company Property or any part thereof, and none of the Company or any of its Subsidiaries has received any notice, oral or written, of the intention of any governmental body or other Person to take or use all or any part thereof. (d) None of the Company or any of its Subsidiaries has received any written notice from any insurance company that has issued a policy with respect to any Company Property requiring performance of any structural or other repairs or alterations to such Company Property. (e) None of the Company or any of its Subsidiaries owns or holds, or is obligated under or a party to, any option, right of first refusal or other contractual right to purchase, acquire, sell, assign or dispose of any real estate or any portion thereof or interest therein. 4.15 Tangible Personal Property. (a) Schedule 4.15(a) sets forth all leases of personal property ("Personal Property Leases") involving annual payments in excess of $15,000 relating to personal property used in the business of the Company and its Subsidiaries or to which the Company or any of its Subsidiaries is a party or by which the properties or assets of the Company or any of its Subsidiaries is bound. The Company has delivered or otherwise made available to the Purchaser true, correct and complete copies of the Personal Property Leases, together with all amendments, modifications or supplements, if any, thereto. (b) Each of the Company and its Subsidiaries has a valid leasehold interest under each of the Personal Property Leases under which it is a lessee, and there is no default under any Personal Property Lease by the Company or any of its Subsidiaries, or to the Knowledge of the Company, by any other party thereto, and no event has occurred which, with the lapse of time or the giving of notice or both would constitute a default thereunder by the Company or any of its Subsidiaries or, to the Knowledge of the Company, by any other party thereto. (c) Except as set forth on Schedule 4.15(b), each of the Company and its Subsidiaries has good and marketable title to all of the items of tangible personal property reflected in the Company Financial Statements referred to in Section 4.17 (except as sold or disposed of subsequent to the date thereof in the ordinary course of business consistent with past practice), free and clear of any and all Liens. All such items of tangible personal property that, individually or in the aggregate, are material to the operation of the business of the Company and its Subsidiaries are in good condition and are currently usable in the ordinary course. (d) All of the items of tangible personal property used by the Company and its Subsidiaries under the Personal Property Leases are in good condition and are currently usable in the ordinary course. 4.16 Environmental Matters. Except as set forth on Schedule 4.16: (a) The Company and each of its Subsidiaries have obtained all permits, licenses and other authorizations, if any, which are required under Environmental Laws for the operation of the Company's or such Subsidiary's business and the Company and each of its Subsidiaries are in compliance with all terms and conditions of required permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, notifications, schedules and timetables contained in the Environmental Laws; (b) Neither the Company nor any of its Subsidiaries has Knowledge of or has received notice of, the disposal or release or presence of Hazardous Substances on any of its properties, or of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance on the part of the Company or any such Subsidiary with Environmental Laws, or may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, Lien, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Substance; (c) All assets of the Company and its Subsidiaries are free from Hazardous Substances except for Hazardous Substances used, maintained or handled by the Company or such Subsidiary in the ordinary course of business and the use and disposal of any and all such Hazardous Substances is effected by the Company or such Subsidiary in compliance with all applicable Environmental Laws; and (d) There is not pending or threatened against the Company or any of its Subsidiaries and neither the Company nor any of its Subsidiaries Knows of any facts or circumstances that might give rise to, any civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, environmental Lien, investigation, or proceeding relating in any way to Environmental Laws. 4.17 Company SEC Reports and Financial Statements. (a) Neither the Company nor any of the Subsidiaries is required to file any forms, reports or other documents with the SEC. (b) The Company has furnished to the Purchaser (a) true, complete and correct copies of the Company's unaudited, consolidated balance sheet (the "Interim Balance Sheet") as of June 30, 1998 (the "Balance Sheet Date"), and statements of income and cash flow for the periods ended June 30, 1998 (collectively, the "Interim Financials") compiled by the Company, and (b) true, complete and correct copies of the Company's audited balance sheet as of December 31, 1997 and consolidated statements of income, cash flow and stockholders' equity for the fiscal year ended December 31, 1997 (collectively, the "Audited Financials") (collectively, the "Interim Financials" and the "Audited Financials" are referred to as the "Company Financial Statements"). The Company Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") consistently applied throughout the periods involved (except that the Interim Financial Statements do not contain footnotes required by GAAP and are subject to normal year-end adjustments). The Company Financial Statements present fairly the financial condition and results of operations of the Company, as at the dates and for the periods indicated. Since the Balance Sheet Date there have been no material changes in the Company's accounting policies. (c) Except to the extent set forth on the Interim Balance Sheet or on Schedule 4.17, the Company has not incurred any liability or obligation of any nature whatsoever (whether due or to become due, accrued, fixed, contingent, liquidated, unliquidated or otherwise) that would be required by GAAP to be accrued on, reflected on, or reserved against it, on a consolidated balance sheet (or in the applicable notes thereto) of the Company prepared in accordance with GAAP consistently applied, other than liabilities or obligations which arose in the ordinary course of business and consistent with past practices since such date and which do not exceed $2.5 million in the aggregate. 4.18 Changes. Except as set forth on Schedule 4.18, since the Balance Sheet Date, there has not been: (a) any change in the assets, liabilities, financial condition or operating results of the Company or any of its Subsidiaries, except changes in the ordinary course of business; (b) any damage, destruction or loss to any property or assets of the Company or any of the Subsidiaries, whether or not covered by insurance; (c) any waiver by the Company or any of its Subsidiaries of a material right or of a debt owed to it outside of the ordinary course of business; (d) any satisfaction or discharge of any Lien or payment of any obligation by the Company or any of its Subsidiaries; (e) any change or amendment to a contract or arrangement by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound or subject; (f) any events or circumstances that otherwise could reasonably be expected, individually or in the aggregate, to have a material adverse effect on the Company or any of its Subsidiaries; and (g) none of the Company or any of its Subsidiaries has (i) declared or paid any dividends, or authorized or made any distribution upon or with respect to any class or series of its capital stock or equity interests, (ii) incurred any indebtedness for money borrowed in excess of $50,000, (iii) made any loans or advances to any Person, other than ordinary advances for travel expenses not exceeding $50,000, or (iv) sold, exchanged or otherwise disposed of any of its assets or rights for consideration in excess of $50,000 in any one transaction or series of related transactions. 4.19 Employee Benefit Plans. Except as set forth on Schedule 4.19: (a) Identification of Plans. Neither the Company nor any ERISA Affiliate maintains or contributes to, or has maintained or contributed to, any Plan or Multiemployer Plan that is subject to regulation by Title IV of ERISA; (b) Compliance. Each Plan has at all times been maintained, by its terms and in operation, in accordance with all Applicable Laws. (c) Liabilities. Neither the Company nor any ERISA Affiliate is currently or, to the best knowledge of the Company or any ERISA Affiliate, will become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any person whomsoever with respect to any Plan, including, but not limited to, any tax, penalty or liability arising under Title I or title IV of ERISA or Chapter 43 of the Code, except such liabilities which will not have a material adverse effect on the Company and the Subsidiaries taken as a whole. (d) Funding. The Company and each ERISA Affiliate has made full and timely payment of (i) all amounts required to be contributed under the terms of each Plan and Applicable Law and (ii) all material amounts required to be paid as expenses of each Plan. No Plan has any "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA); and (e) Insolvency; Reorganization. No Plan is insolvent (within the meaning of Section 4245 of ERISA) or in reorganization (within the meaning of Section 4241 of ERISA). 4.20 Taxes. All federal, state and local and foreign tax returns, reports and statements required to be filed by the Company or any of its Subsidiaries have been filed or have been caused to be filed with the appropriate governmental agencies in all jurisdictions in which such returns, reports and statements are required to be filed and all such returns, reports and statements are true, complete and correct in all respects. All taxes, charges and other impositions due and payable by the Company or any of its Subsidiaries have been paid in full on a timely basis except where contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books and records of the Company or Subsidiary in accordance with GAAP. The provision for taxes of each of the Company and its Subsidiaries is sufficient for all unpaid taxes, charges and other impositions of any nature due or accrued as of the date thereof, whether or not assessed or disputed. Proper and accurate amounts have been withheld by the Company and its Subsidiaries from their respective employees for all periods in full and complete compliance with the tax, social security and unemployment withholding provisions of applicable federal, state, local and foreign law and such withholdings have been timely paid to the respective governmental agencies. The Company has not received notice of any audit or of any proposed deficiencies from any governmental authority, and no controversy with respect to taxes of any type is pending or to its Knowledge threatened. Except for routine filing extensions granted as a matter of right under applicable law, none of the Company or any of its Subsidiaries has executed or filed with the IRS or any other governmental authority any agreement or other document extending, or having the effect of extending, the period of assessment or collection of any taxes, charges or other impositions. Except as set forth on Schedule 4.20, none of the Company or any of its Subsidiaries has agreed or is required to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise. Further, none of the Company or any of its Subsidiaries has any obligation under any tax-sharing agreement. 4.21 Labor and Employment Matters. With respect to employees of and service providers to the Company and the Subsidiaries: (a) the Company and the Subsidiaries are and have been in compliance in all material respects with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including without limitation any such laws respecting employment discrimination, workers' compensation, family and medical leave, the Immigration Reform and Control Act, and occupational safety and health requirements, and have not and are not engaged in any unfair labor practice; (b) there is not now, nor within the past three years has there been, any unfair labor practice complaint against the Company or any Subsidiary pending or, to the Company's or any Subsidiary's Knowledge, threatened before the National Labor Relations Board or any other comparable authority; (c) there is not now, nor within the past three years has there been, any labor strike, slowdown or stoppage actually pending or, to the Company's or any Subsidiary's Knowledge, threatened against or directly affecting the Company or any Subsidiary; (d) to the Company's or any Subsidiary's Knowledge, no labor representation organization effort exists nor has there been any such activity within the past three years; (e) no grievance or arbitration proceeding arising out of or under collective bargaining agreements is pending and, to the Company's or any Subsidiary's Knowledge, no claims therefor exist or have been threatened; (f) the employees of the Company and the Subsidiaries are not and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against the Company or any Subsidiary or currently being negotiated by the Company or any Subsidiary; and (g) all Persons classified by the Company or its Subsidiaries as independent contractors do satisfy and have satisfied the requirements of law to be so classified, and the Company and its Subsidiaries have fully and accurately reported their compensation on IRS Forms 1099 when required to do so. 4.22 No Pending Transactions. Except as set forth on Schedule 4.22 and except for the transactions contemplated by this Agreement, neither the Company nor any Subsidiary is a party to or bound by or the subject of any agreement, undertaking or commitment with any Person that could result in (i) the sale, merger, consolidation or recapitalization of the Company or any Subsidiary, (ii) the sale of all or substantially all of the assets of the Company or any Subsidiary, or (iii) a change of control of more than five percent (5%) of the outstanding capital stock of the Company or any Subsidiary. 4.23 Disclosure. No representation or warranty by the Company contained in any of the Transaction Documents, in the schedules attached hereto or in any certificate furnished or to be furnished by the Company to the Purchaser in connection herewith or pursuant hereto contains or will contain any untrue statement or a material fact or omits or will omit to state any material fact necessary in order to make any statement contained herein or therein not misleading. 4.24 Brokers' Fees. Except as set forth on Schedule 4.24, no broker, finder, investment banker or other Person is entitled to any brokerage fee, finder's fee or other commission in connection with the transactions contemplated by this Agreement based upon arrangements made by the Company. 4.25 Not an Investment Company. The Company is not an Investment Company within the meaning of the Investment Company Act of 1940, as amended. 4.26 Real Property Holding Company. The Company is not a United States Real Property Holding Corporation within the meaning of Section 897(c)(2) of the Code. 4.27 Total Shares Outstanding. Schedule 4.27 sets forth the capitalization of the Company as of the date hereof (including without limitation all options, warrants and other instruments convertible into or exchangeable for equity securities of the Company). SECTION 5 Representations and Warranties of the Purchaser The Purchaser hereby represents and warrants to the Company, as follows: 5.1 Accredited Investor; Experience; Risk. (a) The Purchaser is an accredited investor and has been advised and understands that the Series C Preferred and the Common Stock issuable upon redemption of the Series C Preferred have not been registered under the Securities Act, on the basis that no public offering of the Series C Preferred or the Common Stock issuable upon redemption of the Series C Preferred has been effected, except in compliance with the applicable securities laws and regulations or pursuant to an exemption therefrom; provided, however, that nothing in this Section 5.1 shall limit the Purchaser's right to redeem the Series C Preferred for Common Stock as set forth in this Agreement or the Series C Certificate of Designation. (b) Such Purchaser is purchasing the Series C Preferred for investment purposes, for its own account and not with a view to, or for sale in violation of federal or state securities laws. (c) Such Purchaser has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the purchase of the Series C Preferred pursuant to this Agreement. (d) The certificates representing the Series C Preferred and the shares of Common Stock issuable upon redemption of the Series C Preferred shall bear a legend evidencing such restriction on transfer substantially in the following form: "The securities represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933, as amended (the "Act") or the securities laws of any state and may not be sold or transferred except pursuant to registration under the Act or an exemption therefrom." 5.2 Authorization. The Purchaser has all requisite power and authority to execute and deliver each of the Transaction Documents and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Transaction Documents and the transactions contemplated hereby and thereby have been duly authorized by all necessary, action on the part of the Purchaser. Each Transaction Document to which it is a party has been duly and validly executed and delivered by the Purchaser and constitutes the legal, valid and binding obligation of the Purchaser, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). 5.3 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any federal, state, or local governmental authority on the part of the Purchaser is required in connection with the valid execution and delivery by the Purchaser of the Transaction Documents to which it is a party, or the consummation by the Purchaser of the transactions contemplated by the Transaction Documents to which it is a party, except for such filings as have been made prior to the Closing. 5.4 Organization, Good Standing and Qualification. The Purchaser (i) is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to carry on its business, (iii) is duly qualified to transact business and is in good standing in all jurisdictions where its ownership, lease or operation of property or the conduct of its business requires such qualification, except where the failure to do so would not be material to the Purchaser. The Purchaser has the power and authority and is in possession of all material franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders to (i) own, lease and operate its properties and to carry on its business as now being conducted and (ii) execute and deliver the Transaction Documents and the documents and instruments contemplated hereby and thereby and to consummate the transactions contemplated hereby. SECTION 6 Conditions to Closing of Purchaser The Purchaser's obligation to purchase the Series C Preferred at the Closing is, at the option of such Purchaser, subject to the fulfillment on or prior to the Closing Date of the following conditions: 6.1 Representations and Warranties Correct. The representations and warranties made by the Company in Section 4 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. 6.2 Covenants. All covenants, agreements and conditions contained in this Agreement to be performed by the Company on or prior to the Closing Date shall have been performed or complied with in all respects. 6.3 Opinion of Company's Counsel. The Purchaser shall have received from Swidler & Berlin, counsel to the Company, an opinion addressed to the Purchaser, dated the Closing Date, that is customary for a transaction of this type. 6.4 No Material Adverse Change. Since the Balance Sheet Date, there shall not have occurred any events or circumstances that could reasonably be expected, individually or in the aggregate, to have a material effect on the Company or any of the Subsidiaries. 6.5 Series C Certificate of Designation. The Series C Certificate of Designation shall have been duly adopted and executed by the Company and filed with the Secretary of State of the State of Delaware. 6.6 State or Federal Securities Laws. All registrations, qualifications and Permits required under applicable state or federal securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. 6.7 Issuance of Shares. The Company shall have issued pursuant to this Agreement 300 shares of Series C Preferred, par value $.01 per share, as adjusted, and shall have delivered to the Purchaser a stock certificate or certificates representing such shares of Series C Preferred. 6.8 Officer's Certificate. The Purchaser shall have received a certificate of the President or a Vice President of the Company to the effect that the conditions set forth in Sections 6.1, 6.2, 6.4, 6.5 and 6.6 have been met. 6.9 CFO Certificate. The Purchaser shall have received a certificate of the Chief Financial Officer of the Company substantially in the form attached hereto as Exhibit 6.9. 6.10 Required Consents. At or prior to the Closing, the Company shall have delivered or caused to be delivered to the Purchaser all of the Required Consents. 6.11 Corporate Documents. At or prior to the Closing, the Company shall have delivered or caused to be delivered to the Purchaser: (a) a certificate of the Secretary of State of the Company's state of incorporation dated not earlier than the fifteenth (15th) day preceding the Closing Date, to the effect that the Company is a corporation validly existing and in good standing under the laws of such state as of such date; (b) a certificate of the Secretary of State of each state where the Company is required to qualify to do business dated not earlier than the fifteenth (15th) day preceding the Closing Date, to the effect that the Company is a corporation duly licensed or qualified to do business in such state and is in good standing as a foreign corporation under the laws of such state as of such date; and (c) certificates of the Secretary or Assistant Secretary of the Company certifying (A) copies of the certificate of incorporation, bylaws and other governing documents of the Company as then in effect or a certification that there has been no change in such instruments since the last such certification delivered to the Purchaser pursuant to this Agreement, (B) duly enacted resolutions of the Company's board of directors in form and substance satisfactory to the Purchaser approving the Transaction Documents and authorizing officers of the Company to execute and deliver instruments required to be delivered hereunder or thereunder as a condition precedent to the Closing, and (C) specimen signatures of the officers of the Company authorized to sign such instruments. 6.12 Origination Fee. The Company shall have tendered to the Purchaser the Origination Fee as set forth in Section 3.2. SECTION 7 Conditions to Closing of the Company The Company's obligation to issue and sell the Series C Preferred at the Closing is, at the option of the Company, subject to the fulfillment of the following conditions: 7.1 Representations. The representations and warranties made by the Purchaser in Section 5 hereof shall be true and correct when made, and shall be true and correct on the Closing Date with the same force and effect as if they had been made on and as of such date. 7.2 Purchase Price. The Purchaser shall have tendered to the Company the Purchase Price, as set forth in Section 3.2. 7.3 Certificate. The Company shall have received a certificate from the Purchaser to the effect that the conditions set forth in Section 7.1 have been met. 7.4 State or Federal Securities Laws. All registrations, qualifications and Permits required under applicable state or federal securities laws, if any, shall have been obtained for the lawful execution, delivery and performance of this Agreement. SECTION 8 Covenants of the Company 8.1 Information. (a) Commencing on the Closing Date, the Company shall deliver to the Purchaser the information specified in this Section 8.1(a) unless the Purchaser at any time specifically requests in writing that such information not be delivered to it: (i) Loan Agreement Reports and Information. Commencing on the Closing Date, the Company shall deliver to the Purchaser the same reports and other information provided to the Lender pursuant to Section 6.2(a) - (g) of the Loan Agreement; provided, however, that in the event such provisions of the Loan Agreement are from time to time amended, modified or changed after the Closing Date, Purchaser shall have the right at its option to either (i) continue to receive such reports and information as such sections of the Loan Agreement provide for as of the Closing Date, or (ii) receive such reports and information as such sections of the Loan Agreement provide for following such amendment, modification or change. (ii) Other Information. From time to time, and promptly, such additional information regarding results of operations, financial condition or business of the Company and its Subsidiaries, including without limitation, cash flow analysis, stockholder equity, projections, minutes of any meetings of the Board of Directors and any information that may be distributed or made available to the Board of Directors, as the Purchaser may reasonably request. (b) Commencing on October 1, 1998, the Company shall deliver to the Purchaser the information specified in this Section8.1(b) unless the Purchaser at any time specifically requests in writing that such information not be delivered to it: (i) Material Litigation. Within ten (10) days after the Company learns of the commencement or written threat of commencement of any litigation or proceeding against the Company, any of its Subsidiaries or any of their respective assets that could reasonably be expected to have a material effect on the Company or any of the Subsidiaries, written notice of the nature and extent of such litigation or proceeding. (ii) Material Agreements. Within five (5) days after the expiration of the applicable cure period, if any, or if no such cure period exists within ten (10) days after the receipt by the Company of written notice of a default by the Company or any of its Subsidiaries under any material contract, agreement or document to which any of them are a party or by which any of them are bound, written notice of the nature and extent of such default. 8.2 Regulatory Matters. Each of the Company and Purchaser will (i) make on a prompt and timely basis all governmental or regulatory notifications, filings or submissions, as necessary for the consummation of the transactions contemplated hereby, including any filings required pursuant to the Hart-Scott-Rodino Antitrust Act, if required, (ii) use all reasonable efforts to cooperate with the other and its representatives in (A) determining which notifications, filings and submissions are required to be made prior to the Closing Date with, and which consents, approvals, permits or authorizations are required to he obtained prior to the Closing Date from, any governmental authority in connection with the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and (B) timely making of all such notifications, filings or submissions and timely seeking all such consents, approvals, permits or authorizations, and (iii) use all reasonable efforts to take, or cause to be taken, all other action and do, or cause to be done, all other reasonable things necessary or appropriate to consummate the transactions contemplated by this Agreement. The Purchaser shall have no obligation to expend any funds in connection with the action to be taken by the Company pursuant to this section. 8.3 Access. From time to time and upon the written request of the Purchaser, the Company shall promptly afford the Purchaser and its accountants, counsel and other representatives, full access during normal business hours to all of its properties, books, contracts, commitments and records, permit them to copy or make extracts therefrom, and the Company shall furnish promptly to Purchaser all information concerning its business, properties and personnel as Purchaser may reasonably request; provided, however, that no investigation pursuant to this Section 8.3 shall affect any representations or warranties of either party hereunder. 8.4 Confidentiality. From and after the date of this Agreement, each of the Company and Purchaser agree to hold, and will cause its Subsidiaries, employees, agents and representatives to hold, in confidence, unless compelled to disclose by judicial or administrative process or, in the written opinion of their counsel, by other requirements of law, information furnished by the Company, on the one hand, to Purchaser and information furnished by Purchaser, on the other hand, to the Company in connection with the transactions contemplated by this Agreement, and each of such persons agree that they shall not release or disclose such information to any other person, except their respective officers, directors, partners, employees, auditors, attorneys, financial advisors and other consultants, advisors and representatives who need to know such information and who have been informed of the confidential nature of such information and have been directed to treat such information as confidential, and except that Purchaser shall have the right to disclose such information to any of its investors or other equity holders, or to any of its potential investors or equity holders as long as the same have been informed of the confidential nature of such information and have been directed to treat such information as confidential. The foregoing provisions of this Section 8.4 shall not apply to any such information which (i) becomes generally available to the public other than as a result of a disclosure by any person bound hereunder, (ii) was available to a person bound hereunder on a non-confidential basis prior to its disclosure hereunder, or (iii) becomes available to any person bound hereunder on a non-confidential basis by virtue of the disclosure thereof by a source other than the party providing such information in reliance upon the protection of confidentiality reposed hereby. 8.5 Publicity. Except as may be required by law, the Company shall not use the name of, or make reference to, the Purchaser or any of its Affiliates in any press release or in any public manner without the Purchaser's prior written consent. 8.6 IRC Section 1202. The Company shall use reasonable efforts to comply with Section 1202(c) of the Code and shall make all filings required under Section 1202(D)(1)(c) of the Code and any related treasury regulations. 8.7 Reservation of Common Stock. The Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Common Stock upon a redemption of the Series C Preferred, the number of shares of Common Stock deliverable upon redemption of all outstanding shares of Series C Preferred. 8.8 Registration Rights. Prior to consummating an initial public offering of capital stock of the Company, the Company will use its best efforts to terminate the existing registration rights agreements relating to the Company's securities and to enter into a new registration rights agreement which grants to the Purchaser (i) at least one demand registration right which is at least as favorable as the most favorable demand registration right granted to any other holder of securities of the Corporation, and (ii) piggyback, cutback and other registration rights at least as favorable as, and ranking at least pari passu in priority with, the most favorable piggyback, cutback and other registration rights granted to any other holder of securities of the Corporation, provided, however, that in the event the Company has not entered into such new registration rights agreement within one year following the filing of the Series C Certificate of Designation and the Series C Preferred has not been redeemed in full within such period, the events of noncompliance provisions set forth in the Series C Certificate of Designation shall apply; provided, however, that all demand registration rights granted to Purchaser hereunder shall be initiated by the holders of a majority of the shares of Common Stock issued or issuable upon redemption of the Series C Preferred collectively held by the Purchaser and FBR Business Development Capital ("FBR"); and upon exercise of such registration rights by such initiating holders, each holder of Series C Preferred shall have the right to participate in such registration pro rata in proportion to the number of shares requested to be registered by the Purchaser and FBR upon exercise of any such demand registration rights. 8.9 Loan Agreement Provisions. The Company shall not, without the prior written consent of the holder or holders of a majority of the shares of Series C Preferred, collectively held by the Purchaser and FBR, which consent may be withheld in such holder or holders' sole discretion: (i) amend, modify, add to or otherwise change any of the provisions in Section 8.5 of the Loan Agreement relating to the redemption of, or payment of dividends on, the Series C Preferred; or (ii) agree to any full or partial refinancing or replacement of the Loan Agreement unless such refinancing or replacement permits the redemption of, and payment of dividends on, the Series C Preferred in accordance with Section 8.5 of the Loan Agreement as in effect on the date hereof. SECTION 9 Miscellaneous 9.1 Amendment; Waiver. Neither this Agreement nor any provision hereof may be amended, modified, supplemented or waived, except by a written instrument executed by (i) the Company and (ii) the Purchaser. 9.2 Notices. Any notices or other communications required or permitted hereunder shall be sufficiently given if in writing and delivered in Person, transmitted by facsimile transmission (fax) or sent by registered or certified mail (return receipt requested) or recognized overnight delivery service, postage pre-paid, addressed as follows, or to such other address has such party may notify to the other parties in writing: if to the Company: IT Partners, Inc. 9881 Broken Land Parkway Columbia, Maryland Attn: President Telephone No.: (410) 309-9800 Facsimile No.: (410) 309-9801 with a copy to: Swidler & Berlin, Chartered 3000 K Street, N.W., Suite 300 Washington, D.C. 20007-5116 Attn: Andrew M. Ray, Esq. Telephone No.: (202) 424-7585 Facsimile No.: (202) 424-7645 if to the Purchaser: Wachovia Capital Associates, Inc. 191 Peachtree Street, N.E. 26th Floor Atlanta, Georgia 30303 Attn: Donna Harris, Esq., Vice President Telephone No.: (404) 332-1176 Facsimile No.: (404) 332-1455 A notice or communication will be effective (i) if delivered in Person or by overnight courier, on the business day it is delivered, (ii) if transmitted by telecopier, on the business day of actual confirmed receipt by the addressee thereof, and (iii) if sent by registered or certified mail, three (3) business days after dispatch. 9.3 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 9.4 Successors and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors and permitted assigns of the parties hereto. No party hereto may assign its rights or delegate its obligations under this Agreement without the prior written consent of the other parties hereto; provided, however, that all or any part of the shares of the Series C Preferred may be transferred, sold, assigned or otherwise disposed at the sole discretion of Purchaser and without the consent of the Company. 9.5 Survival of Representations, Warranties and Covenants. All representations and warranties made in, pursuant to or in connection with any of the Transaction Documents shall survive the execution and delivery of the Transaction Documents, any investigation at any time made by or on behalf of the Purchaser, and the sale and purchase of the Series C Preferred and payment therefor for a period of three (3) years; provided, however, that the representations and warranties made in Sections 4.16 (Environmental), 4.19 (Benefits) and 4.20 (Taxes) shall survive the applicable statutory period of limitations with respect to any liabilities covered thereby; provided further, that notwithstanding the foregoing, all representations and warranties made in, pursuant to or in connection with any of the Transaction Documents shall terminate upon the closing of a Qualified Initial Public Offering. Unless otherwise provided in this Agreement, the covenants made pursuant to the Transaction Documents shall survive and remain in force until no shares of Series C Preferred are held by the Purchaser. 9.6 Entire Agreement. This Agreement and the other documents delivered pursuant hereto, including without limitation the Transaction Documents, constitute the full and entire understanding and agreement between the parties with regard to the subject matter hereof and thereof and supersede and cancel all prior representations, alleged warranties, statements, negotiations, undertakings, letters, acceptances, understandings, contracts and communications, whether verbal or written, among the parties hereto and thereto or their respective agents with respect to or in connection with the subject matter hereof. 9.7 Choice of Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to principles of conflict of laws. 9.8 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 9.9 Costs and Expenses. Promptly after the Closing, the Company shall pay the reasonable fees and disbursements incurred by the Purchaser (including without limitation reasonable attorneys' and consultants' fees) in connection with this Agreement and the transactions contemplated hereunder; provided, however, that the Company's aggregate payment obligations under this Section 9.9 shall not exceed $15,000; provided further, that the parties shall bear their own costs and expenses if the Closing hereunder fails to take place. 9.10 No Third-Party Beneficiaries. Nothing in this Agreement will confer any third party beneficiary or other rights upon any Person (specifically including any employees of the Company and its Subsidiaries) or entity that is not a party to this Agreement. 9.11 Indemnification. From and after the Closing Date, the Company shall indemnify, defend and hold Purchaser, its directors, officers and Affiliates (each an "Indemnified Party" and collectively, the "Indemnified Parties") harmless from and against any and all claims, losses, liabilities, damages, costs and expenses (including reasonable attorney's fees) (collectively, "Losses") that may be suffered or incurred by, or asserted against, the Indemnified Parties, arising from or related to, directly or indirectly: (a) any breach of any representation or warranty of the Company or any Subsidiary set forth in any of the Transaction Documents (including without limitation any schedule or certificate delivered by or on behalf of the Company or any Subsidiary pursuant hereto or thereto); or (b) any nonfulfillment of any covenant or agreement on the part of the Company or any Subsidiary in any of the Transaction Documents; and (c) any and all Losses incident to any of the foregoing. 9.12. Survival. The rights to indemnification under Section 9.11 shall apply only to those claims for indemnification which are delivered pursuant hereto on or before the expiration of the relevant representation, warranty, or covenant to which such claim relates, as set forth in Section 9.5. 9.13 Indemnification Procedure. (a) An Indemnified Party shall give written notice to the Company of any claim with respect to which it seeks indemnification within ten (10) days after the discovery by such parties of any matters giving arise to a claim for indemnification pursuant to Section 9.11; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Company of its obligations under this Section 9.13, except to the extent that the Company is actually prejudiced by such failure to give notice. In case any such action or claim is brought against any Indemnified Party, the Company shall be entitled to participate in and, unless in the reasonable good faith judgment of the Indemnified Party a conflict of interest between such Indemnified Party and the Company may exist in respect of such action or claim, to assume the defense thereof, with counsel satisfactory to the Indemnified Party and after notice from the Company to the Indemnified Party of its election so to assume the defense thereof, the Company shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. In any event, unless and until the Company elects in writing to assume and does so assume the defense of any such action or claim the Indemnified Party's costs and expenses arising out of the defense, settlement or compromise of any such action or claim shall be Losses subject to indemnification hereunder. If the Company elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense. The Company shall not be liable for any settlement of any action or claim effected without its written consent. Anything in this Section 9.13 to the contrary notwithstanding, the Company shall not, without the Indemnified Party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof that imposes any future obligation on the Indemnified Party or that does not include, as an unconditional term thereof, the giving by the claimant or the plaintiff to the Indemnified Party, a release from all liability in respect of such claim. 9.14 Maximum Liability. The maximum liability of each of the Company and the Purchaser, respectively, under this Section 9 shall be equal to the Purchase Price. [Remainder of Page Intentionally Left Blank] 12% SERIES C SENIOR REDEEMABLE PREFERRED STOCK PURCHASE AGREEMENT SIGNATURE PAGE IN WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement to be executed effective as of the date first above written. COMPANY: IT PARTNERS, INC. By:/s/ Jamie Blech ---------------------- Jamie Blech President and Secretary PURCHASER: WACHOVIA CAPITAL ASSOCIATES, INC. By: /s/ Matthew J. Sullivan ----------------------- Name: Matthew J. Sullivan Title: Managing Director EX-10.1 10 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of theday of June, 1998, by and among SERVINET CONSULTING GROUP, INC., a California corporation ("Seller"), Mahesh Khatwani, Gary Prioste, Gray Drohan and Keith Matsunaga (collectively referred to herein as the "STOCKHOLDER") and IT PARTNERS, INC. a Delaware corporation ("ITP" or "Purchaser"). W I T N E S S E T H: WHEREAS, Seller is, among other things, engaged in the business of selling and installing technology software and providing related consulting services (the "Business"); and WHEREAS, Seller desires to sell and Purchaser desires to purchase certain assets of Seller, upon the terms and subject to the conditions set forth herein; WHEREAS, immediately following the Closing, the Purchaser shall sell, assign, transfer, convey and deliver and ITP No. 8, Inc., a Delaware corporation and wholly owned subsidiary of Purchaser ("NEWCO"), shall purchase and acquire all of Purchaser's right title and interest in the Assets and Assumed Liabilities (as such terms are defined herein) (the "Drop Down"); and WHEREAS, the parties hereto desire to enter into certain other covenants among themselves as an inducement to and in connection with the execution, delivery and performance of this Agreement; WHEREAS, unless the context otherwise requires, capitalized terms used in this Agreement or in any schedule attached hereto and not otherwise defined herein shall have the following meanings for all purposes of this Agreement: "Balance Sheet" means the Seller's audited February 28, 1998 Balance Sheet prepared in accordance with GAAP at Purchaser's expense by Purchaser's independent accountants, Arthur Andersen, L.L.P. and previously delivered to the Seller. Purchaser has reviewed the Balance Sheet and, after such review, the Purchaser and Seller have agreed upon the LTM EBITDA calculation as such term is defined herein below and which calculation may be adjusted in accordance with the preparation of the Final Closing Balance Sheet as such term is defined herein below. "Balance Sheet Date" means February 28, 1998. "Benefit Plan" means any Plan existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the Seller, any ERISA Affiliate, or any predecessor of any of the foregoing, under which any employee or former employee of the Seller, or any beneficiary thereof, is covered, is eligible for coverage or has benefit rights. "Code" means the Internal Revenue Code of 1986, as amended. "Debt" means all liabilities of the Seller as determined under GAAP except ordinary course trade payables. "EBITDA" means earnings before interest, taxes, depreciation and amortization prepared in accordance with GAAP. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "GAAP" means generally accepted accounting principles of the United States applied in a manner consistent with the past practices of the Seller. "Governmental Authority" means any governmental, regulatory or administrative body, agency, subdivision or authority, any court or judicial authority, or any public, private or industry regulatory authority, whether national, Federal, state, local or otherwise. "Intellectual Property" means trademarks, service marks, trade dress, trade names, patents and copyrights and any registration or application for any of the foregoing, and any trade secret, invention, discovery, method of doing business, process, know-how, including but not limited to, training techniques, training materials, computer software (including source and object code), databases, technology systems and integration techniques, product design and product packaging. "ITP Stock" means the common stock, par value $.01 per share, of ITP. "Knowledge," "best of knowledge," "aware" or similar expressions mean the following with respect to (i) an individual and (ii) a Person (other than an individual): (i) an individual will be deemed to have "knowledge" of a particular fact or other matter if a prudent individual knew or should have known if an inquiry were called for under the circumstances. (ii) a Person (other than an individual) will be deemed to have "knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, knowledge of such fact or other matter. "Leases" means all real and personal property leased by Seller and used, useful or held for use in connection with Seller's business. "LTM EBITDA" means EBITDA for the twelve month period commencing on March 1, 1997 and ending on February 28, 1998. Based on the Balance Sheet, the LTM EBITDA is $1,772,024.00. "Material Contract" means any lease, instrument, agreement, license or permit set forth on Schedule 3.28 of this Agreement or any other material agreement to which the Seller is a party or by which its properties are bound. "NTM EBITDA" means EBITDA for the twelve month period commencing on June 1, 1998 and ending on May 31, 1999. "Person" means any natural person, corporation, partnership, proprietorship, other business organization, trust, union, association or Governmental Authority. "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA.. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "Working Capital" means $1,200,000, which shall be the minimum amount of cash on-hand as of the Closing Date for the working capital cash requirements of NEWCO ("Working Capital"). At Closing, Purchaser shall deposit $1,200,000 of the Cash Portion (as such term is defined in Section 2.1(i) herein below) into a bank account established prior to the Closing Date (the "Working Capital Account"). If Working Capital requirements shall be in excess of $1,200,000 during the period between Closing and one hundred twenty (120) days thereafter (the "Working Capital Adjustment Period"), then STOCKHOLDER shall contribute excess Working Capital requirements to the Working Capital Account, or to Purchaser; provided, however, that to the extent any additional Working Capital requirements are due to the unavailability of a floating line of credit or alternative financing to purchase products or services during the Working Capital Adjustment Period, then Working Capital requirements shall be funded by Purchaser. During the Working Capital Adjustment Period, STOCKHOLDER covenants and agrees to operate NEWCO's business in accordance with Seller's past business practices. For purposes of this Agreement, "past business practices" shall mean business practices consistent with Seller's business practices during the LTM period with respect, but not limited to, the payment of (i) trade payables, (ii) payroll, (iii) Deuche Bank credit lines and (iv) accrued expenses and (v) the billing and collection of accounts receivable consistent with reasonable payment and collection lag times ("Past Business Practices"). Within sixty (60) days after the conclusion of the Working Capital Adjustment Period, Purchaser shall perform a limited review (the "Working Capital Review") for the period ending on the last day of the Working Capital Adjustment Period to verify that NEWCO was operated in accordance with Seller's Past Business Practices. If, in Purchaser's sole discretion, it determines that NEWCO was not operated in accordance with Seller's Past Business Practices, or if, for any other reason not specifically excepted herein, Working Capital requirements are in excess of $1,200,000, then STOCKHOLDER shall contribute such excess Working Capital requirements, in Purchaser's sole discretion, to the Working Capital Account or to Purchaser (the "Working Capital Adjustment Shortfall"). The Working Capital Adjustment Shortfall shall be paid by STOCKHOLDER, as determined by Purchaser, either in cash, or by reduction of the Second Note or the Second Convertible Note; provided, however, that if NEWCO has a business opportunity requiring Working Capital in excess of $1,200,000, and NEWCO receives prior written approval from Purchaser before committing any Working Capital or entering into such business opportunity, then such excess Working Capital requirements may be provided by Purchaser. AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, representations and warranties set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: Section 1. Sale and Purchase of the Assets Section 1.1 Sale and Purchase. At the Closing (as defined below), upon the terms and subject to the conditions set forth in this Agreement, Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller, all of Seller's right, title and interest in and to all the assets of Seller of every kind, character and description, whether now owned or hereafter acquired by Seller prior to the Closing Date, whether tangible or intangible, and whether real, personal or mixed, and wherever located, which are owned, used or held for use in connection with, generated by, derived from or attributable to, or otherwise related to, the Business (excluding the Excluded Assets (as defined in Section 1.2 hereof) (all of which are collectively referred to herein as the "Assets"), including, but not limited to, all of the following: (a) all equipment, machinery, vehicles, office furniture, fixtures, tools, dies, spare parts, appliances, computer hardware, equipment and supplies, and other similar tangible personal property, including, without limitation, the personal property and equipment set forth on Schedule 1.1(a) hereto; (b) all inventories, including, without limitation, raw materials, work in process, finished goods, inventories held by customers on a consignment basis, stores, supplies, materials and manufactured and purchased parts, but excluding all items of inventory rejected by Purchaser because of Purchaser's determination that they are either not related to the Business, or are obsolete or inappropriately valued; (c) all patents, trademarks, trade names, service marks and copyrights, and all applications, registrations, extensions, reissues and continuations thereof, all licenses and sublicenses with respect thereto, all rights thereunder, and all remedies against infringement thereof, including without limitation those items set forth on Schedule 1.1(c) hereto; (d) all technologies, materials, formulations, data bases, trade secrets, secret processes, know how, inventions and other intellectual property and intangible property of every kind and nature; (e) all computer software (including documentation and related object and source codes); (f) all rights and interests under orders, bids, quotations and similar arrangements relating to the purchase or sale of Seller's goods and services, to the extent not fulfilled prior to the Closing Date; (g) all rights and interests under licenses, contracts, agreements, leases or commitments, including without limitation, contracts providing for the lease of equipment, machinery, office equipment, furniture and vehicles, sales representative agreements, distributor agreements, consignment agreements and other similar agreements, whether as principal or agent or distribution, to the extent (i) transferable to Purchaser and (ii) set forth on Schedule 1.1(g) hereof ("Assigned Contracts"); (h) all franchises, approvals, permits, licenses, qualifications, authorizations, orders, registrations, certificates, variances, and similar rights obtained from or issued by any Governmental Authority (as defined in Section 3.5 below), and all pending applications therefor; (i) all rights and interests of Seller under all warranties, guarantees and covenants not to compete for the benefit of the Business or the Assets; (j) all books, records, accounts, ledgers, files, data, documents, forms, correspondence, lists, plats, architectural plans, drawings, specifications, creative materials, advertising and promotional literature and materials, studies, reports, and other printed, written, machine readable, electronic or computer-generated materials to the extent they relate to the Assets or the Business; (k) the name "Servinet Consulting Group, Inc." and all variations and derivations thereof; and (l) the Business as a going concern and all goodwill associated therewith. Section 1.2 Excluded Assets. Notwithstanding any provision in Section 1.1 or elsewhere herein to the contrary, the Assets shall not include any of the following: (a) those Assets disposed of in the ordinary course of business as permitted by this Agreement; (b) all matters pertaining to Seller's corporate existence including minute books, stock transfer books, tax returns, and tax identifications, books of account and other records pertaining to Seller's corporate organization; provided, however, that Seller agrees that Purchaser, upon reasonable notice, shall have a the right at all times to inspect all matters pertaining to Seller's corporate existence; (c) the consideration and all other rights accruing to Seller under this Agreement; (d) $1,200,000 in Working Capital; (e) the Accounts Receivable of Seller; (f) any Accounts Payable in excess of $500,000; (g) the rights to all of Seller's claims for any federal, state, local or foreign tax refunds or adjustments; (h) any rights and interests of Seller under contracts, agreements and commitments that are not set forth on Schedule 1.1(g); and (i) items of personal property, including furniture in the office of Stockholder. Section 1.3 Liabilities. (a) Notwithstanding any other provision herein to the contrary, Purchaser is not assuming and shall have no obligation to pay, perform or discharge any liabilities, debts, accounts payable or other obligations of Seller of any kind or nature whatsoever, whether known or unknown, fixed or contingent, whenever arising or accruing, other than the Assumed Liabilities (as such term is defined in this Section 1.3). (b) From and after the Closing Date, Purchaser shall assume and perform the Assumed Liabilities and shall hold Seller and Stockholder harmless therefrom. As used herein, the term "Assumed Liabilities" means only the following: (i) the Assigned Contracts set forth on Schedule 1.1(g) hereto; and (ii) any trade or accounts payable in an amount less than or equal to $500,000 of Seller accrued prior to the Closing Date (Seller shall provide Purchaser with a list of such trade or accounts payable prior to the Closing Date). (c) Notwithstanding the foregoing, except for Assumed Liabilities expressly and specifically set forth above, for purposes of amplification and not of limitation Purchaser shall not assume and shall have no obligation to pay or perform any of the following debts, liabilities or obligations of Seller: (i) any tax, fee or charge pertaining to the Assets accruing on or prior to the Closing Date, including but not limited to income, sales, use, transfer or other tax, whether imposed on Seller or Purchaser, accruing due to the transactions contemplated hereby; (ii) any contract, agreement, lease or commitment not specifically set forth on Schedule 1.1(g) hereto; (iii)any environmental liability; (iv) any debts, liabilities or obligations arising under any guarantee, bond, debt, loan or credit agreement, promissory note, mortgage, security agreement, pledge or other similar agreement or instrument; (v) any obligation or liability to indemnify any person or entity (including but not limited to any officer, director or stockholder) for any expense, loss, damage, judgment, fine, cost, amount paid in settlement, legal fees or otherwise, whether such indemnity is pursuant to any statute, charter document, bylaws, agreement or otherwise; (vi) any liability or obligation relating to any financial indebtedness of Seller; (vii) any debt, liability or obligation incurred by Seller under this Agreement, or any cost or expense incurred in connection herewith or the transactions contemplated hereby, including, but not limited to attorney's fees and broker's fees; or (viii) any other debt, liability or obligation of Seller or of the Business, fixed, contingent or otherwise, whenever accrued, whether or not arising in the ordinary course of business. Section 2. Purchase Price and Payment. Section 2.1 Purchase Price. Purchaser has audited the books and financial records of Seller through February 28, 1998, and, based on such audit, Purchaser has determined the amount of initial consideration to be paid to the Seller in payment and consideration for the sale and transfer of the Assets by Seller to Purchaser. Upon the terms and subject to the conditions set forth herein, Purchaser shall assume and thereafter perform the Assumed Liabilities of Seller set forth in Section 1.3(b) hereof and Purchaser shall pay to Seller as consideration (the "Initial Consideration") the amounts set forth below. The Initial Consideration shall be paid as follows: (i) On the Closing Date the Seller shall receive $5,528,715.00 in cash, of which $1,200,000 shall be deposited into the Working Capital Account (the "Cash Portion"), to be paid by certified or bank cashier's check or by wire transfer of immediately available funds to an account designated by Seller and the Working Capital Account; (ii) On the Closing Date, Purchaser shall issue and deliver to Seller an unsecured, subordinated, convertible promissory note in the amount of $1,488,500 (the "Convertible Note"), substantially in the form attached hereto as Annex VI. The Convertible Note shall be interest free and shall be payable in full on the Maturity Date if not converted. During the term of the Convertible Note, the principal amount of the Convertible Note shall be convertible, at Seller's option, into common stock, par value $ .01 per share, of Purchaser (the "Common Stock"), which shares shall be valued at the time of conversion, if any, at the fair market value determined in accordance with Purchaser's common practices, or, if Purchaser has consummated an initial public offering ("IPO"), the price of Purchaser's Common Stock shares as traded on the public markets (the "Fair Market Value"). If Seller exercises its conversion rights hereunder, then Seller shall, prior to the issuance by Purchaser of any Common Stock pursuant to this subparagraph, return the Convertible Note to Purchaser for cancellation and execute a Joinder Agreement substantially in the form attached hereto as Annex IV binding it and all its shares of Purchaser Stock to the provisions of the Stockholders' Agreements of Purchaser dated May 29, 1997, as amended form time to time (the "Stockholders' Agreement"). Upon conversion of the Convertible Note, Seller shall have waived any preemptive rights accorded to Stockholders (as such term is defined in the Stockholders' Agreement) under the Stockholders' Agreement; (iii) On the Closing Date, Purchaser shall issue and deliver to Seller an unsecured, subordinated promissory note in the aggregate principal amount of $1,488,500 (the "First Note") substantially in the form attached hereto as Annex V. (iv) On the Closing Date, Purchaser shall assume the Assumed Liabilities as defined herein; and Section 2.2 Post-Closing Adjustments to Consideration. (a) As promptly as practicable, and in any event not more than ninety (90) days following the Closing Date, Purchaser, together with its accountants, shall prepare and deliver to Seller's accountants a proposed final closing balance sheet (the "Proposed Final Closing Balance Sheet") for the period ended on the Closing Date, prepared on a basis consistent with the Purchaser's balance sheet. The Seller and Seller's accountants shall have the right to consult during reasonable business hours with appropriate personnel of Purchaser and Purchaser's accountants and have access to, and review and make copies of, the work papers of Purchaser and Purchaser's accountants with respect to the preparation of the Proposed Final Closing Balance Sheet. (b) (i) The Seller may dispute the Proposed Final Closing Balance Sheet prepared by Purchaser and Purchaser's accountants by notice to Purchaser setting forth in reasonable detail the amounts in dispute and the basis for such dispute within forty-five (45) days of its receipt of the Proposed Final Closing Balance Sheet. If the Seller fails to deliver a notice of objections within such 45-day period, the Seller shall be deemed to have accepted the Proposed Final Closing Balance Sheet which shall then constitute the final Closing Balance Sheet (the "Final Closing Balance Sheet"). (ii) If the balance in the Working Capital on the Proposed Final Closing Balance is in dispute, Purchaser's accountants and the Seller's accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within fifteen (15) days of the date of receipt by Purchaser of a written notice of dispute, Purchaser and the Seller shall, within five (5) additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within thirty (30) days of such submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by Purchaser in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. are in Seller's favor, and any of the remaining amount shall be borne by Seller. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver a Final Closing Balance Sheet and a certification of the conclusions thereon. (iii) If there is any Debt on the Final Closing Balance Sheet, then Seller shall pay to Purchaser, in cash, the Debt amount within seven (7) days after receiving a copy of the Final Closing Balance Sheet. Section 2.3 Additional Consideration Based on Performance. STOCKHOLDERS Khatwani and Prioste will, pursuant to Section 5.9 of this Agreement, be employed by Purchaser in the management of NEWCO. Purchaser understands that STOCKHOLDERS Khatwani and Prioste will utilize their best efforts in managing NEWCO. The best efforts of STOCKHOLDERS Khatwani and Prioste notwithstanding, Purchaser expressly agrees that neither Seller or STOCKHOLDER can guarantee the future performance of NEWCO and that the Initial Consideration paid to Seller pursuant to Section 2.1 of this Agreement shall not be reduced, except as expressly provided for in this Agreement, in any manner in relation to the future performance of NEWCO. However, according to the following terms and conditions, within ninety (90) days after May 31, 1999, upon presentation of financial statements accompanied by a report of Purchaser@s accountants demonstrating that NEWCO's NTM EBITDA (the "NTM EBITDA Calculation") exceeds $2,126,429 (120% of LTM EBITDA), the Seller shall receive additional consideration (the "Additional Consideration"). In no event shall such Additional Consideration exceed (20% of the total amount of Initial Consideration or $2,126,429). Purchaser shall pay to Seller any Additional Consideration as follows: (i) The amount of the Additional Consideration shall be determined as follows: (a) If the NTM EBITDA does not exceed $1,772,024.00 (LTM EBITDA), then Seller shall not receive any Additional Consideration; (b) If the NTM EBITDA is equal to or greater than $2,126,429.00 (120% of LTM EBITDA), then Seller shall receive, and Purchaser shall issue and deliver to Seller: (1) An unsecured, subordinated, convertible promissory note in the amount of $1,063,214.50 (the "Second Convertible Note"). The Second Convertible Note shall be interest free and shall be payable in full on the Maturity Date if not converted. During the term of the Second Convertible Note, the principal amount shall be convertible, at Seller's option, into Common Stock of Purchaser, which shares shall be valued at the time of conversion, if any, at the Fair Market Value. If Seller exercises its conversion rights hereunder, then Seller shall, prior to the issuance by Purchaser of any Common Stock pursuant to this subparagraph, return the Second Convertible Note to Purchaser for cancellation and execute a Joinder Agreement substantially in the form attached hereto as Annex IV binding it and all its shares of Purchaser Stock to the provisions of the Stockholders' Agreements of ITP dated March 30, 1998, as amended from time to time (the "Stockholders' Agreement"). Upon conversion of the Convertible Note, Seller shall have waived any preemptive rights accorded to Stockholders (as such term is defined in the Stockholders' Agreement) under the Stockholders' Agreement; and (2) An unsecured, subordinated promissory note in the principal amount of $1,063,214 (the "Second Note"). (c) If the NTM EBITDA is between $1,772,024.00 and $2,126,429.00, then the principal amount of the Second Convertible Note and the principal amount of the Second Note shall be calculated as follows: (1) by subtracting the amount of NTM EBITDA from the LTM EBITDA; (2) by dividing the result of subparagraph (1) above by $354,405.00 (the difference between NTM EBITDA and 120% of NTM EBITDA); (3) by multiplying the result of subparagraph (2) above by the maximum amount of the Additional Consideration (20% of the total amount of the Initial Consideration or $2,126,429.00); and (4) by taking the result in subparagraph (3) above and allocating one-half of such amount to the Second Convertible Note and one-half the amount to the Second Note. (ii) If Seller is eligible to receive Additional Consideration pursuant to Section 2.1(i)(c), then, within ninety (90) days after May 31, 1999, Seller shall receive: (a) The Second Convertible Note in the principal amount to be determined in accordance with the NTM EBITDA Calculation in Section 2.1(i)(c) above; (b) a Second Note in the principal amount to be determined in accordance with the NTM EBITDA Calculation in Section 2.1(i)(c) above. Section 2.4 NTM EBITDA Calculation Determination. The STOCKHOLDER may dispute the NTM EBITDA calculation set forth in the financial statements prepared by Purchaser and Purchaser's accountants by notice to Purchaser setting forth in reasonable detail the amounts in dispute and the basis for such dispute within forty- five (45) days of its receipt of such financial statements. If the STOCKHOLDER fails to deliver a notice of objections within such respective 45-day period, the STOCKHOLDER shall be deemed to have accepted the NTM EBITDA. If the NTM EBITDA amount is in dispute, Purchaser's and STOCKHOLDER's accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within fifteen (15) days of the date of receipt by Purchaser of a written notice of dispute, Purchaser and the STOCKHOLDER shall, within five (5) additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within thirty (30) days of such submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by Purchaser in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. are in STOCKHOLDER's favor, and any of the remaining amount shall be borne by STOCKHOLDER. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver financial statements for the period beginning June 1, 1998 and ending May 31, 1999, and a certification of the NTM EBITDA set forth therein. Section 2.5 Issued Shares. The Issued Shares shall be issued by Purchaser in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws and shall constitute "restricted securities" as such term is defined in Section 144 promulgated under the Securities Act. Section 2.6 Convertible Note and Second Convertible Note. The Convertible Note and the Second Convertible Note, if any, shall each be interest free. During the term of the Convertible Note or the Second Convertible Note, unpaid principal, respectively, may be converted into Common Stock shares of Purchaser at the Fair Market Value of such shares at the time of conversion. Section 2.7 First Note and Second Note. The First Note and the Second Note, if any, shall bear interest, respectively, on the unpaid principal balance at a fixed rate per annum equal to 8.0% pursuant to the terms specified on Annex V attached hereto. Section 2.8 Allocation of Purchase Price. The Consideration set forth in Section 2.1, and any Additional Consideration paid in accordance with Section 2.3 hereof shall be allocated among the Assets for all purposes (including financial reporting and tax purposes) as set forth and contemplated herein. STOCKHOLDER and Purchaser each hereby covenants and agrees that it will not take a position on any income tax return, before any governmental agency charged with the collection of any income tax, or in any judicial proceeding that is in any way inconsistent with this Agreement. Section 3. Representations and Warranties of Seller and STOCKHOLDER. Seller and STOCKHOLDER hereby jointly and severally represents and warrants to and for the benefit of Purchaser as follows: Section 3.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of California. Seller is duly qualified or licensed to do business and is in good standing as a foreign corporation in each state and other jurisdiction in which the ownership, lease or operation of the assets and properties or the conduct of its business requires such qualification or licensing, as set forth on Schedule 3.l hereto, except where the failure to be so qualified would not have a material adverse effect upon the Seller or the Business. Except for the jurisdictions in which Seller is incorporated or is qualified or licensed as a foreign corporation, (i) no other jurisdiction has claimed, orally or in writing, that Seller is required to be licensed or qualified as a foreign corporation therein, (ii) Seller has never filed any franchise, income or other tax return in any other jurisdiction, based upon the ownership, lease or operation of property or assets therein or the derivation of income therefrom, and (iii) Seller does not own, lease or operate any property in any other jurisdiction, and the Assets are not located in any other jurisdiction. Section 3.2 Subsidiaries. Seller has no direct or indirect subsidiaries and does not own, hold or control, directly or indirectly, any shares of capital stock or any equity, ownership, management or voting interest in any corporation, general or limited partnership, limited liability Seller, joint venture, business trust or other business entity or association except as set forth on Schedule 3.2. Section 3.3 Power and Authority. Seller has all requisite right, power and authority, corporate or otherwise, to conduct its business and affairs (including the Business) as presently conducted and as proposed to be conducted, to own, lease and operate its assets and properties (including the Assets), and to execute, deliver and perform its obligations under, this Agreement and the other agreements and instruments to be executed and delivered by Seller hereunder (the "Related Seller Agreements"). The execution and delivery by Seller of this Agreement and the Related Seller Agreements and the performance by Seller of its obligations hereunder and thereunder have been duly and validly authorized by all requisite action, corporate or otherwise, of Seller. Section 3.4 Enforceability. This Agreement and the Related Seller Agreements have been, or at Closing will have been duly and validly executed and delivered on behalf of Seller and constitute or will constitute legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally, and by general principles of equity, whether applied by a court of law or in equity. Section 3.5 No Conflicts. The execution and delivery by Seller of this Agreement and the Related Seller Agreements and the performance by Seller of the transactions and obligations contemplated hereby and thereby do not and will not, directly or indirectly, (a) violate, conflict with, or constitute a breach of or a default (or an event that, after the giving of notice or the lapse or time or both, would constitute a default) under, any provision of (i) its articles of incorporation, bylaws or other charter or organizational documents, (ii) any agreement among its shareholders or between Seller and its shareholders, (iii) any contract, obligation, note, security agreement, mortgage, bond, indenture, lease, loan agreement, debt instrument or other instrument, commitment or agreement to which Seller is a party or by which Seller or any of its assets (including the Assets) is or may be bound, or (iv) any license, franchise, approval, certificate, permit or authorization held by Seller or applicable to its assets (including the Assets), which violation, conflict, breach or default would have a material adverse effect upon the Seller or the Business; (b) violate any applicable federal, state, local or foreign law, statute, rule, regulation or ordinance, or any order, injunction, writ, judgment, decree or ruling of any court, arbitrator or governmental, quasi- governmental, administrative or regulatory body, agency or authority ("Governmental Authority"), which violation would have a material adverse effect upon the Seller or the Business; (c) result in the creation or imposition of any mortgage, lien, pledge, security interest, conditional sales rights under any applicable bulk sales or bulk transfer law or other title retention agreement, or any other restriction, encumbrance or claim of any kind or description on or against any of Sellers' assets (including the Assets); or (d) constitute an event which would permit any individual, Entity or Governmental Authority (collectively, "Person") to terminate or modify any agreement, instrument or commitment or to accelerate the maturity of any debt, liability or obligation of Seller. Section 3.6 Defaults. It is not presently in material breach or violation of or material default under or conflict with any item set forth in Section 3.5(a) or (b); and no event or condition has occurred which, after the giving of notice or the lapse of time or both, could be reasonably expected to result in any such material breach, violation, default or conflict. Section 3.7 Consents. Except as set forth on Schedule 3.7, no consent, authorization, permit or approval of, notice or report to, or filing or registration with, or waiver (collectively, "Consents") by, any Person is necessary for Seller to execute and deliver this Agreement and the Related Seller Agreements and to perform its obligations hereunder and thereunder. Prior to the Closing Date, Seller shall obtain all Consents listed on Schedule 3.7 unless failure to obtain such would not have a material adverse effect on the Seller or the Business. Section 3.8 Litigation. There are no actions, suits, claims, investigations, arbitrations, hearings or other proceedings (whether civil, criminal, administrative, investigative or informal) (collectively, "Proceedings") pending or, to Seller's best knowledge, threatened by, before or involving any court, arbitrator or governmental Authority (i) against or affecting Seller, the Business or the Assets, (ii) in which any Person has sought or is reasonably likely to seek to restrain or prohibit, or to obtain damages or other relief in connection with, this Agreement or the Related Seller Agreements or the transactions contemplated hereby or thereby, (iii) which, if determined adversely to Seller, would be reasonably likely to have a material adverse effect on Seller, the Business or the Assets or Seller's ability to perform its obligations hereunder or to consummate the transactions contemplated hereby, or (iv) involving in whole or in part the issue of criminal liability by Seller or any of its officers, directors, employees or agents, or pertaining to the Assets or the Business. Neither Seller nor any of the Assets are subject to any outstanding judgment, order, writ, injunction or governmental or regulatory order or authority. Seller is not presently engaged in any legal action to recover moneys due from damages caused by or to enforce its rights against any third party. Section 3.9 Ability to Dispose of the Assets. Seller is the sole legal owner of the Assets and has the sole dispositive power with respect to the Assets. Section 3.10 Brokers' Fees. Except as set forth on Schedule 3.10, no broker, finder, investment broker or similar agent is or shall be entitled to receive any fee, commission or other remuneration or compensation relating to the transactions contemplated by this Agreement based on any action taken by or on behalf of Seller. Section 3.11 Capitalization. The authorized capital stock of Seller consists of ------ shares of common stock, par value $----- per share, of which ----- shares are issued and outstanding all of which are owned beneficially and of record by STOCKHOLDER. Section 3.12 Dividends. Seller has no liability or indebtedness for dividends or other distributions declared or accumulated but unpaid with respect to any of its outstanding capital stock. Since February 28, 1998, Seller has not declared or paid any dividends or other distributions to its shareholders. Section 3.13 Corporate Documents. Seller has furnished to Purchaser true and complete copies or originals, as the case may be, of the following documents: (i) the articles of incorporation and bylaws of Seller; (ii) the minute books of Seller containing all records required to be set forth of all proceedings, consents, actions and meetings of the shareholders and board of directors (and all committees thereof) of Seller; and (iii) the stock transfer books of Seller setting forth all issuances and transfers of capital stock of Seller. Section 3.14 Financial Statements. Seller has furnished (or, with respect to the 1997 financial statement prior to the Closing will forward,) to Purchaser true and complete copies of Seller's audited balance sheets as of December 31, 1996 and 1997, and the related statements of operations and cash flows for the fiscal years then ended (together with the report thereon of an independent certified public accountants, as to the 1997 financial statements and to the 1996 financial statements, and in each case together with the notes thereto). All such Financial Statements (together with all related schedules and notes) (i) present fairly the financial condition, results of operations and cash flows of Seller as of the respective dates thereof and for the respective periods covered thereby; (ii) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods indicated and with prior periods (except for changes specifically noted therein); (iii) have been prepared in accordance and consistent with the books and records of Seller which have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls; and (iv) reflect reserves which are reasonably adequate for all known or reasonably contemplated liabilities or obligations of any nature, whether accrued, absolute, fixed, contingent or otherwise and whether due or to become due, and all reasonably anticipated losses. Section 3.15 Absence of Undisclosed Liabilities. As of the date hereof, except as set forth in the balance sheet of Seller as of February 28, 1998 and the related notes thereto ("1998 Balance Sheet"), Seller does not have any debt, liability, guarantee, demand or obligation of any kind or nature whatsoever, whether known or unknown, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except for those that (i) are not required by generally accepted accounting principles to be included in the 1997 Balance Sheet, and (ii) have been incurred after the date of the 1997 Balance Sheet in the ordinary course of business and are usual and normal in amount, both individually and in the aggregate. To the best of Seller's knowledge, there has been no circumstance, condition, event or arrangement that could be reasonably expected to give rise to any additional debts, liabilities or obligations of Seller. Section 3.16 No Material Adverse Change. (a) Since February 28, 1998, (i) the business of Seller has been conducted only in its historic, ordinary course, (ii) there has been no material adverse change in the Assets, liabilities, Business, operations, affairs, condition (financial or otherwise) or prospects of Seller; and (iii) there has been no damage, destruction, loss, occurrence or event (whether or not insured against) which, either singly or in the aggregate, has had, or might reasonably be expected to have, a material adverse effect on the Assets, liabilities, Business, operations, affairs, condition or prospects (financial or otherwise) of Seller. (b) Without limiting the generality of the foregoing, since February 28, 1998, there has not been any: (i) Sale, assignment, transfer, lease or other disposition of any Assets, except of inventory and equipment to customers in the ordinary course of business for fair consideration; (ii) Mortgage, pledge, lien, claim or other encumbrance, created or imposed on or against any Asset; (iii) Capital expenditure (or series of related capital expenditures) by Seller exceeding $25,000; (iv) Material destruction, damage to or loss (whether or not insured against) of any Assets; (v) Labor trouble, dispute, strike, work stoppage, or other event or condition of any character, actual or threatened; (vi) Declaration, setting aside, or payment of any dividend or other distribution in respect of the capital stock of Seller, or any direct or indirect redemption, purchase, or other acquisition by Seller of any of its shares of capital stock; (vii) Entering into any agreement, contract, lease or license (or series of related instruments), either involving more than $25,000, or outside the ordinary course of business; (viii) Modification, amendment, cancellation or termination of any contract, agreement, lease or license to which Seller is a party, except in the ordinary course of business; (ix) Commencement or notice or threat of commencement of any Proceeding against or affecting Seller, the Business or the Assets; (x) Incurrence of indebtedness for borrowed money or increase in the long-term indebtedness of Seller; (xi) Amendment to Seller's articles of incorporation or bylaws; (xii) Capital investment in, loan to or acquisition of the securities or assets, or any other Person (other than in the ordinary course of business); (xiii) Grant of any license or sublicense of any Assets or any rights under or with respect to any Intellectual Property; (xiv) Any transaction between Seller and any of its officers, directors or employees, or involving any of the Assets and involving any officers, directors or employees of Seller; (xv) Waiver, cancellation, compromise or release of any material right or claim of Seller, or forgiveness or cancellation of any material debt or claim; (xvi) Loan by Seller to any Person, or guaranty by Seller of any loan, debt or other obligation of any other Person; (xvii) Increase in the salary, benefits or other compensation payable or to become payable by Seller to any of its officers, directors, employees or consultants other than normal merit increases, or the declaration, payment, or commitment or obligation of any kind for the payment by Seller of a bonus or other additional salary or compensation to any such person; (xviii) Agreement, contract, plan, policy or arrangement binding upon Seller either created or modified as to severance or termination benefits of any employee, officer, director or agent; (xix) Failure to maintain levels of inventory proportionate to Seller's existing business, or alteration of the inventory practices maintained by Seller during the previous twelve months; (xx) Other events or conditions of any character that, individually or in the aggregate, (A) have or might reasonably have a material adverse effect on the Assets, Business, operations, financial condition, liabilities or prospects of Seller, or (B) cause or might reasonably be expected to cause Seller to be in breach of any of its representations, warranties or covenants hereunder; or (xxi) Any agreement, commitment, arrangement or understanding by Seller to do any of the actions described in the preceding clauses (i) through (xvi). Section 3.17 Taxes. (a) Within the times (or if later all penalties and interest related thereto having been paid in full) and in the manner prescribed, Seller has accurately prepared in good faith and properly filed all federal, state, local and foreign tax returns, reports and forms required by law, rule, regulation or otherwise to be filed and has paid all taxes, assessments and penalties due and payable, and Seller has furnished to Purchaser true and complete copies of all such tax returns, reports and forms so filed since December 31, 1994. All tax returns, reports and forms filed by Seller accurately set forth all items (to the extent required to be included or reflected in such returns) relevant to its future tax liabilities, including the tax bases of the Assets. Seller has fully paid or has made adequate provision in the 1997 Balance Sheet for all federal, state, local and foreign taxes for the period ending on the date of the 1997 Balance Sheet. Seller has timely collected, withheld and paid over all taxes required to be withheld by any federal, state, local or foreign taxing authority and complied with all information reporting requirements related thereto. (b) There are no disputes pending or overtly threatened by any taxing authority as to taxes of any nature payable by Seller. No examinations or audits of the federal, state, local or foreign tax returns of Seller are currently in progress or, to the best knowledge of Seller, threatened or proposed. No deficiency or adjustment for any tax has been claimed, proposed or assessed against Seller by any taxing authority. Seller has not waived or extended any applicable statute of limitations relating to the assessment of federal, state, local or foreign taxes. Seller is not a party to any tax indemnity, tax sharing, or tax allocation agreement. There are no tax liens upon any property or assets of Seller except for taxes not yet due and payable. (c) Seller has not filed and will not file any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f) of the Code apply to any disposition of subsection (f) assets (as such term is defined in Section 341(f)(4) of the Code) owned by Seller. The acquisition of the Assets by Purchaser will not result in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code, and Seller is not a party to any agreement, plan or arrangement that could give rise to any payment that would not be deductible pursuant to Section 280G or Section 162 of the Code. No outstanding debt obligations of Seller are "corporate acquisition indebtedness" within the meaning of Section 279(b) of the Code. Seller is not a "United States real property holding company" as defined in Section 897(c)(2) of the Code. Seller has not filed an election under Section 338(g) or Section 338(h)(10) of the Code or caused or been the subject of a deemed election under Section 338(e) of the Code. Seller has not made any payments, and is not obligated to make any payment, and is not a party to any agreement, plan or arrangement that under any circumstances could obligate it to make any payments that will not be deductible under Section 162(m) of the Code. (d) As used in this Section 3.16, the term "tax" includes all federal, state, local or foreign income, franchise, profits, gross receipts, value added, net worth, real property, personal property, sales, transfer, use, service, ad valorem, stamp, environmental, windfall profits, employment, social security, Medicare, disability, workers' compensation, unemployment compensation, occupation severance, purchaser premiums, excise, withholding, payroll and other taxes, charges, fees, levies, tariffs, duties and other assessments of any kind or nature, imposed by the laws and regulations of any governmental jurisdiction (federal, state, local or foreign) or by any taxing authority (federal, state, local or foreign) and all interest, fines and penalties related thereto. Section 3.18 Title to and Condition of Assets. The Assets constitute all of the assets, rights and interests of every kind and description that are used by Seller in the Business or necessary for the Business and will permit Purchaser to operate the Business in compliance with all legal requirements substantially as conducted by Seller. All tangible Assets are physically located at 393 East Grand Avenue, South San Francisco, California, 345 Spear Street, San Francisco, California, 276 Main Street, San Francisco, California or 5320 Pacific Concourse Drive, Los Angeles, California. Seller has and will transfer to Purchaser at Closing good, valid, marketable and exclusive title to and rightful and peaceful possession of all of the Assets, free and clear of any and all mortgages, liens, security interests, pledges, charges, encumbrances, equities, rights of first refusal, options to purchase, equitable interest, deeds of trust, claims, easements, rights-of-way, covenants, conditions or restrictions of any kind or nature whatsoever ("Liens"), except for (i) those disclosed in the 1997 Balance Sheet; (ii) liens for current taxes not yet due and payable; and (iii) liens disclosed on Schedule 3.18 hereto which will be removed and released at or prior to the Closing. Seller is in rightful possession of all premises and personal property leased to it from others. All tangible personal property of Seller is generally in good operating condition and repair (ordinary wear and tear excepted), has been utilized or serviced only in a manner that would not void or limit the coverage of any warranty thereon, has been properly maintained and are adequate and suitable for its intended purposes. Section 3.19 Real Property. Seller does not, directly or indirectly, own any real property. Schedule 3.19 hereto contains a true and complete list of all leases and subleases pursuant to which Seller is the lessee or lessor of any real property, complete and accurate copies of which leases have been previously furnished to Purchaser. Seller has a valid leasehold in and enjoys peaceful and quiet possession of all property leased under such leases. Section 3.20 Personal Property Leases. Schedule 3.20 hereto sets forth each lease of personal property under which Seller is either a lessee or lessor of certain of the Assets. Each such lease is in full force and effect and is a valid and binding obligation of Seller and of each of the parties thereto. Seller is not, and Seller does not have any knowledge that any other party is, in default with respect to any material term or condition of any such lease, and no event has occurred which through the passage of time or the giving of notice, or both, would constitute a material default thereunder or would cause the acceleration of any obligation of any party thereto or the creation of a lien or encumbrance upon any Asset. Section 3.21 Inventory. All of Seller's inventory of raw materials, work in process and finished goods, parts and supplies (including inventory on consignment) consists of items of a quantity and quality usable and saleable in the ordinary course of business by Seller (net of any reserve reflected in the 1997 Balance Sheet), except for obsolete, defective, damaged and slow-moving items and items below standard quality, all of which have been written down on the books of Seller to net realizable market value or have been provided for by adequate reserves in the 1997 Balance Sheet. All inventories of finished goods consist of items that have been manufactured in accordance with, and which meet, applicable industry standards. All inventories are correctly marked. The inventories shown on the 1997 Balance Sheet are based on quantities determined by physical count or measurement and are valued at the lesser of cost (determined on a first-in, first-out basis) or market value and on a basis consistent with that of prior years and are adjusted for excess and obsolescence in compliance with Seller's accounting policies which have been delivered in writing to Purchaser. Section 3.22 Intellectual Property. (a) Schedule 3.22 sets forth a complete and accurate list and brief description of all patents, trademarks, logos, service marks, trade names, corporate names, fictitious names and copyrights, and each application therefor, which are either owned by Seller or which are used by Seller in the Business and, in each case where Seller is not the owner thereof, the name of the owner thereof. Except as set forth in Section 3.21, Seller is the exclusive owner of or possesses adequate and valid licenses and other rights to use all of the items set forth in Schedule 3.21 hereto and all trade secrets, licenses, inventions, processes, discoveries, developments, designs, formulas, know- how, drawings, customer and supplier lists, software, confidential information and other proprietary information and all other proprietary rights, intangible assets and intellectual property, and all copies and tangible embodiments thereof in whatever form or medium (collectively, "Intellectual Property") necessary for the operation of the Business as presently conducted and as proposed to be conducted. (b) All rights of Seller in and to its Intellectual Property will be transferred to Purchaser at the Closing. (c) Seller has taken all necessary and desirable action to maintain and protect each item of Intellectual Property that it owns or uses. To Seller's best knowledge, Seller has not interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of any third parties, and Seller has never received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or conflict (including any claim that Seller must license or refrain from using any Intellectual Property rights of any third party). To Seller's best knowledge, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of Seller. No claim, demand, assertion, action, suit, arbitration, hearing, investigation or proceeding is pending or, to the best knowledge of Seller, threatened, which pertains to or challenges the validity, ownership or enforceability of any right of Seller in respect to of Intellectual Property. To Seller's best knowledge, the continued operation of the Business as currently conducted will not interfere with, infringe upon, misappropriate or otherwise come into conflict with any Intellectual Property rights of any third parties. (d) Seller is not a party to any agreement, document, arrangement or understanding pursuant to which Seller has licensed or granted any right or interest in, to or under any of its Intellectual Property. Seller is not obligated or under any liability whatsoever to make any payment, by way of fees, royalties or otherwise, to any owner or licensor of, or other claimant to, any of the Intellectual Property. Seller has not disclosed any of its trade secrets or other proprietary or confidential information to any Person, except pursuant to a loan or other agreement obligating the recipient to maintain the confidentiality thereof. To the best of Seller's knowledge, no employee of Seller is subject to any agreement, arrangement or commitment with any former employer or other person, or is subject to any judgments, order, decree or ruling of any court, arbitrator or Governmental Authority regarding confidential information, or rights or restrictions on competition, that would otherwise affect such employee's ability to perform his duties to Seller. Seller has never agreed to indemnify any person for or against any interference, infringement, misappropriation or other conflict with respect to any item of its Intellectual Property. Section 3.23 Name. Seller has the exclusive right in perpetuity to use the name "Servinet Consulting Group, Inc." in the State of California and any derivations and variations thereof, for and in connection with the Business, and has not granted and will not grant to any other Entity the right to use, and will not after the Closing use, such names as either corporate names, trade names or fictitious names. Section 3.24 Relationships with Suppliers and Customers. Schedule 3.24 contains a complete and accurate list of (i) the names, addresses and dollar amounts of business of each of the 20 largest customers of the Seller, in terms of sales during 1997, and (ii) the name, address and dollar amounts of business of each of the Seller's 10 largest suppliers during the 1997 fiscal year. Since December 31, 1997, no supplier or customer of Seller has canceled any contract or order or has indicated any intention to terminate or materially alter its existing business relationship with Seller, whether as a result of the transactions contemplated hereby or otherwise which cancellation or termination would have a material advance effect on the business of Seller. Seller is not involved, and Seller has no knowledge of any facts or circumstances which is reasonably expected could result, in any material claim, dispute or controversy, with any of its material suppliers or customers. Section 3.25 Labor and Employment Matters. (a) Schedule 3.25(a) contains a true list of all persons employed full time by Seller as of May 31, 1998 or as of the Closing Date, whichever date is later. (b) Seller is not a party to any contract, collective bargaining agreement or other agreement with any labor union including any collective bargaining agreement. There has never been an actual or threatened labor dispute, strike, picket, work slowdown, work stoppage or any other job action at any business location of Seller. There is no unfair labor practice complaint against Seller pending before the National Labor Relations Board or any state or local agency, no pending or threatened labor strike or other material labor trouble affecting Seller, no material labor grievance pending or threatened against Seller, no pending representation question respecting the employees of Seller, no pending or threatened arbitration proceedings arising out of or under any collective bargaining agreement to which Seller is a party, and no basis for which a claim may be made under any collective bargaining agreement to which Seller is a party or under which Seller is alleged to be obligated. No union organizing attempts have been made or threatened. Seller has not received a demand for recognition from any labor union with respect to, and, to Seller's knowledge, no attempt has been made or is being made to organize, any of the persons employed by Seller. (c) Seller is in compliance in all material respects with all applicable laws, rules and regulations respecting the employment of, including but not limited to, fair employment practices, terms and conditions of employment, and wages and hours. Seller has not engaged in any unfair or illegal labor practice, and there are no charges or claims of employment discrimination or unfair labor practices pending, or, to the best knowledge of Seller after due inquiry, threatened against, Seller. (d) No proceedings or claims are pending or, to the best knowledge of Seller, threatened against Seller with respect to any violation or alleged violation of any applicable federal, state or local laws, rules and regulations relating to the employment of labor, including, without limitation, those related to wages and hours, collective bargaining, discrimination on any basis, including without limitation, on the basis of race, color, religion, sex, national origin or age, and Seller has complied in all material respects with all applicable laws and regulations relating to employment of labor. (e) Seller has made, or will have made, payment in full to all of its employees through the end of the payment period ending immediately prior to the Closing Date of all wages, salaries, commissions, bonuses, benefits and other compensation due to such employees or otherwise arising under any policy, practice, agreements, plan, program, statute or law. (f) Seller, STOCKHOLDER and their affiliates are in compliance with their obligations, if any, pursuant to the Workers Adjustment and Retraining Notification Act of 1988, as amended ("WARN"), and all other notification obligations arising under any federal, state or local, or foreign statute, rule or regulation. Section 3.26 Employee Benefit Plans. (a) List of Plans. Except for the plans set forth on Schedule 3.26 hereto, Seller does not now nor has it ever established, maintained, sponsored or contributed to any "employee benefit plan. as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any other welfare, bonus, deferred compensation, retirement, incentive, pension, profit sharing, stock purchase, stock option, stock appreciation right, severance, or other similar employee benefit plan, program, policy, arrangement or practice, whether formal or informal, written or oral (collectively, "Employee Plans"), covering any current or former employee, officer or director of Seller. (b) Claims. No Proceeding with respect to any Employee Plan (other than routine claims for benefits) is pending or, to the best knowledge of Seller, threatened, and the Seller (and employees with responsibility for employee benefits matters) has no knowledge of any facts that it is reasonably expected could form the basis for any such action, suit, proceeding, hearing or investigation. (c) ERISA Liabilities. To the best of Seller's knowledge, neither Seller, nor any of the Employee Plans, nor any trust created thereunder, nor, to the knowledge of Seller, any fiduciary (as defined in Section 3(21) of ERISA) thereof, is or has been in violation of, or has incurred any liability, directly or indirectly, under any provision of ERISA or the Code or to its Pension Benefit Guaranty Corporation ("PBCC"), other than liability for premiums due to the PBCC which, to the extent they are due and payable, have been paid. (d) Severance Obligations. Seller has not entered into any severance or similar arrangement in respect to any present or former employee that would result in the obligation, absolute or contingent, of the Purchaser to make any payment to any present or former employee following termination of employment. (e) Liabilities Due to Agreement. The consummation of the transactions contemplated hereby will not (i) modify or accelerate any benefits or the vesting of benefits under any Employee Plan or constitute an event entitling any Person to any additional or other benefits, or (ii) result in any liability to Purchaser for taxes, penalties, interests or other claims resulting from any Employee Plan. Section 3.27 Insurance. Schedule 3.27 hereto sets forth a complete and accurate list of all of the insurance policies (showing the insurer, types of coverage, policy expiration dates, policy numbers, deductibles and policy limits as to each such policy) currently in force under which the Assets are insured or which provide for bonding and surety arrangements in connection with the Business. All such policies are in full force and effect and have been issued under valid policies for the benefit of Seller by properly licensed insurance companies. The premiums on such policies have been paid as they became due and payable, and Seller is not in default with respect to payment of premiums on any such policy. All of the Assets of a type customarily insured are covered by effective insurance in amounts at least equal to their fair market value, and such insurance provides protection against losses and risks that are customarily insured against by comparable businesses. Section 3.28 Contracts. (a) Except as set forth on Schedule 3.28, each lease, contract, agreement, license, understanding, indenture, mortgage, deed of trust, sales order, obligation and commitment ("Contract") to which Seller is a party, or by which it or any of the Assets are bound, (i) is in full force and effect and is a valid and binding obligation of Seller and of the other parties thereto, enforceable by Seller in accordance with its terms, and (ii) if an Assigned Contract, may be transferred by Seller to Purchaser without penalty and will be enforceable by Purchaser. Neither Seller nor, to the best knowledge of Seller, any other party to such Contract is in any material respect in breach of or in default under any Contract, nor has any event or circumstance occurred which, with notice or lapse of time or both, would constitute a material breach or default of the Contract. Seller has not received notice and has no reason to believe that any party to any Contract intends to cancel or terminate any Assigned Contract or to exercise or not exercise any option thereunder. (b) Schedule 3.28 hereto sets forth a complete and accurate list of each of the following Contracts to which Seller is a party or by which the Assets are bound: (i) any distributor's or manufacturer's representative or agency agreement; (ii) any output or requirements agreements; (iii) any agreement not entered into in the ordinary course of business; (iv) any indenture, mortgage, deed of trust, lease or any agreement that is unusual in nature, duration, or amount (including, without limitation, any agreement requiring the performance by the Seller of any obligation for a period of time extending beyond one year from the Closing Date involving total consideration of more than $10,000); (v) any contract with any Government Authority, (vi) any Contract that is materially adverse to the business, properties, assets, liabilities, financial condition or results of operations of Seller; (vii) any Contract for the lease of personal property to or from any Person; (viii) any Contract for the purchase or sale of raw materials, commodities, supplies, products or other personal property, or for the furnishing or receipt of services, the performance of which would extend over a period of more than one (1) year or that involves consideration in excess of $10,000; (ix) any Contract concerning a partnership or joint venture; (x) any Contract under which it has created, incurred, assumed, guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, or under which it has imposed a lien on any of the assets; (xi) any Contract concerning confidentiality or non-competition; (xii) any Contract involving any director, officer, stockholder or other affiliate of Seller; (xiii) any Contract for the employment of any individual on a full-time, part-time, consulting, independent contractor or other basis or providing severance benefits; (xiv) any profit sharing, deferred compensation, severance, termination or other plan or arrangement for the benefit of current or former directors, officers, or employees; (xv) any Contract under which it has advanced or loaned any amount to any of its directors, officers or employees; or (xvi) any Contract material to the Assets or the Business. Section 3.29 Licenses. All licenses, rights, privileges, franchises, permits, approvals, consents and other authorizations related to the Assets reasonably necessary for the lawful conduct of the Business as it is presently conducted and reasonably necessary to own, operate, maintain and use the Assets in the manner in which they are now being operated, maintained and used, including all applicable zoning, environmental, health, safety and other permits, have been timely obtained and are currently in effect, and Seller has not violated, and is not in violation of, any such licenses, rights, privileges, permits, franchises, consents or other authorizations. Section 3.30 Product Liability Claims. No Proceeding is pending or, to the best knowledge of Seller, threatened against or affecting Seller, arising out of any injury to individuals or to property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by Seller, and Seller knows of no facts, circumstances, actions or omission that could reasonably create the basis for any such Proceeding. Section 3.31 Product Warranties. Schedule 3.31 sets forth a complete and accurate description of all warranties and pending warranty and service obligations of Seller to its customers with respect to the products manufactured or sold by Seller within the two year period prior to the date of this Agreement, including the beginning and ending dates of such warranty obligations, and a summary of the warranty charges incurred by Seller during 1996, 1997 and to date in 1998. Schedule 3.31 also contains a copy of all such written warranties, and a list and amount of all products manufactured or sold by Seller. Each product manufactured, sold, leased or delivered by Seller to any of its customers has been in conformity with all applicable contractual commitments and all express and implied warranties. Seller has no current liability, and knows of no reasonable basis for any present or future Proceeding against it giving rise to any liability, for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the 1997 Balance Sheet. There is no pending or, to the best knowledge of Seller, threatened Proceeding under such warranties. Section 3.32 Compliance with Laws. Seller, the Business and the Assets are and have been in material compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, rules, regulations, codes, licenses, permits, orders, judgments, decrees and other legal requirements (including, without limitation, those applicable to building, health, employment, labor, product liability, zoning, occupational safety, conservation, unfair competition, labor practices or corrupt practices) which affect or are applicable to the Assets and the Business. Section 3.33 Environmental Laws. (a) Seller is, and at all times has been, in compliance in all material respects with all federal, state, local and foreign laws (whether common or statutory), statutes, codes, rules, regulations, orders, injunctions, decrees, judgments, compacts, treaties, conventions, legal doctrines, plans, demand letters, agreements with any governmental or regulatory authorities and all other requirements relating to pollution or the protection of health, safety or the environment ("Environmental Laws"), including without limitation the release, discharge or emission of any Hazardous Substances (as defined below) into the environment (including, without limitation ambient air, surface water, ground water, land surface, or subsurface strata) and the manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, resulting from the operation of the Business or the ownership, lease or use of the Assets, or relating to any real estate currently or previously owned but leased by Seller. (b) Seller has not received any notices, demand letters, citations, summons, complaints or requests for information from, and no action, suit, hearing, investigation, order or other proceeding is pending or, to the best knowledge of Seller, threatened by or before any court, Governmental Authority or other Person regarding any actual or threatened violation of or liability under any Environmental Law. (c) Seller is not subject to any judicial, executive, legislative, regulatory or administrative ruling, order or decree arising under or relating to any Environmental Law. (d) Seller has timely obtained, currently holds and is in compliance in all material respects with the provisions of all permits, licenses, certificates, consents and other authorizations and approvals required in connection with the operation of its business and the ownership, leasing or use of its assets and properties under all Environmental Laws. (e) Seller is not aware of any event, condition, circumstance, activity, practice, action or plan which is reasonably likely to (i) prevent continued compliance with the foregoing, (ii) give rise to any liability under any Environmental Law, including but not limited to liability based on or resulting from Seller's manufacturing, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge or release into the environment of any Hazardous Substance, (iii) give rise to any liability for remedial actions (including removal, clean-up, response and monitoring), or (iv) otherwise have a material adverse effect on Seller or cause Seller to incur substantial costs. No Hazardous Substance has been used, stored, placed, treated, transported, manufactured, generated, processed, deposited, distributed, handled, released, deposited, spilled, discharged or disposed of on or under any property currently or previously owned or leased by Seller except for common household and office products in de-minimis quantities. (f) There is no above-ground or underground storage tank located on or under, or to Seller's best knowledge any asbestos located on, any real property or structure owned or leased by Seller. (g) As used herein, the term "Hazardous Substance" means (i) any substance or material heretofore or hereafter designated as "hazardous" or "toxic" under the Resource Conservation and Recovery Act, 42 U.S.C. sec 9601 et seq., the Federal Water Pollution Control Act, 33 U.S.C. sec 1251 et seq., the Clean Air Act, 42 U.S.C. sec 7401 et seq., the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. sec9601 et seq., or the Hazardous Materials Transportation Act, 49 U.S.C. sec 1801 et seq., all as amended and in the regulations promulgated thereunder pursuant thereto; (ii) any "solid waste," "hazardous waste," "contaminant," "pollutant" or "infectious waste," as such terms are defined in any other Environmental Law at any time; (iii) asbestos, urea-formaldehyde, polychlorinated biphenyls ("PCBs"), methylene chloride, trichlorethylene, 1,2-transdichloreoethyline, dioxins, dibenzofurans, nuclear fuel or material, chemical waste, radioactive material, explosives, known carcinogens, petroleum products and byproducts, and other dangerous, toxic or hazardous pollutants, contaminants, chemicals, materials or substances listed or identified in, or regulated by, any Environmental Law; (iv) any substances listed in the United States Department of Transportation Table (49 C.F.R. 172.17d.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 C.F.R. Part 302 and amendments thereto); and (v) any additional substances, materials and wastes which at any time become classified or considered to be hazardous or toxic under any Environmental Law. Section 3.34 No Loss of Rights or Legal Obstacles. The execution and delivery of this Agreement and the Related Seller Agreements by Seller and its performance of the transactions and its obligations contemplated hereby and thereby do not and will not: (a) result in any loss of any material legal right of Seller being transferred to Purchaser; (b) result in any termination, modification or cancellation of any Assigned Contract; (c) result in the termination, modification, or cancellation of, give rise to any right of termination, modification, or cancellation with respect to, give rise to the acceleration of any performance required under, result in any increase in any payment due or other liability under, change the performance required under, or otherwise adversely affect any material contract, or modify any material contract, or result in, or require, the creation or imposition of any material lien, charge, or encumbrance upon the Assets, or result in the termination or impairment of any material permit, license, franchise, or authorization pertaining to the Assets; or (d) to the best of Seller's knowledge, adversely affect the Assets or the Business in any material respect. Section 3.35 Bank Debt. Schedule 3.35 hereto sets forth a complete and accurate list of all loans and credit agreements, line of credit, promissory notes, loan agreements and other arrangements between Seller and any bank, financial institution, lender or creditor of any sort. Section 3.36 Transactions with Shareholders and Employees. Seller has no outstanding loans or other advances to, and is not a party to any lease, license or other agreement, understanding or arrangement with, any shareholder, officer, director or employee of Seller, other than out-of-pocket expenses incurred in the ordinary course of business. No shareholder, officer, director or employee of Seller owns or has any interest in any of the Assets. Section 3.37 Absence of Certain Commercial Practices. To the best of Seller's knowledge, neither Seller nor any officer, director, employee or agent of Seller (or any Person acting on behalf of any of the foregoing), has directly or indirectly (i) given or agreed to give any gift or similar benefit of more than nominal value on behalf of Seller to any customer, supplier, employee or official of any Governmental Authority (domestic or foreign), to induce the recipient or his employer to do business, grant favorable treatment or compromise or forego any claim, (ii) made any significant payment which might be improper under prevailing law (regardless of the jurisdiction in which such payment was made) to promote or retain sales or to help, procure or maintain good relations with suppliers, (iii) engaged in any activity which constitutes a violation of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations promulgated thereunder, (iv) engaged in any practice violating any law prohibiting compliance with an unsanctioned foreign boycott, (v) established or maintained any unrecorded or illegal corporate fund or account or assets, (vi) made false or fictitious entries on the books or records of Seller, or (vii) failed to perform its obligations in any material respect under any Contract with, or violated in any material respect any federal law known to Seller in its dealings with, the Federal government or any agency or department thereof, including, but not limited to, any law with respect to conspiracy to defraud, false claims, conspiracy to defraud the United States, embezzlement or theft of public money, fraud and false statements, false demands against the United States, mail fraud, wire fraud, RICO, and truth in negotiations. To the best of Seller's knowledge, no such gift or benefit is required in connection with the operations of Seller or its business to avoid any fine, penalty, cost, expense or adverse change in the assets, properties, liabilities, financial condition, results of operations or business of Seller. Section 3.38 Non-Foreign Status. Seller is not a "non- resident alien", "foreign corporation", "foreign partnership", "foreign trust" or "foreign estate" within the meaning of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. Section 3.39 Full Disclosure. No representation, warranty or other statement by Seller in this Agreement, or in any schedule, exhibit, certificate, financial statement or other instrument or document furnished or to be furnished to Purchaser, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary in order to make any of the statements contained herein or therein, when taken as a whole, not false or misleading in any material respect in light of the circumstances in which they were made. There is no fact or circumstance known to Seller that materially adversely affects, or in the future may be reasonably expected to (insofar as Seller can now reasonably foresee) materially adversely affect, the Assets or the properties, liabilities, business, affairs, operations, condition (financial or otherwise) or prospects of Seller that has not been set forth herein or otherwise described to Purchaser. Section 4. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to and for the benefit of Seller and STOCKHOLDER as follows: Section 4.1 Organization. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Purchaser is duly qualified or licensed to do business and is in good standing as a foreign corporation in each state and other jurisdiction in which the ownership, lease or operation of the assets and properties or the conduct of its business requires such qualification or licensing, as set forth on Schedule 4. l hereto. Except for the jurisdictions in which Purchaser is incorporated or is qualified or licensed as a foreign corporation, (i) no other jurisdiction has claimed, orally or in writing, that Purchaser is required to be licensed or qualified as a foreign corporation therein, (ii) Purchaser has never filed any franchise, income or other tax return in any other jurisdiction, based upon the ownership, lease or operation of property or assets therein or the derivation of income therefrom, and (iii) Purchaser does not own, lease or operate any property in any other jurisdiction, and the Assets are not located in any other jurisdiction. Section 4.2 Power and Authority Purchaser has, or will as of the Closing Date have all requisite right, power and authority, corporate or otherwise, to conduct its business and affairs as presently conducted and as proposed to be conducted, to own, to lease and operate its assets and properties, and to execute all requisite right, power and authority, corporate or otherwise, to execute, deliver and perform its obligations under this Agreement and the other agreements and instruments to be executed and delivered by Purchaser hereunder (the "Related Purchaser Agreements"). The execution and delivery by Purchaser of this Agreement and the Related Purchaser Agreements and performance of Purchaser's obligations hereunder and thereunder has been, or as of the Closing Date will have been duly and validly authorized by all requisite action, corporate or otherwise, of Purchaser. Section 4.3 Enforceability. This Agreement and the Related Purchaser Agreements have been, or as of Closing will have been duly and validly executed and delivered on behalf of Purchaser and constitute, or will constitute as of the Closing Date the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally, and by general principles of equity. Section 4.4 No Conflicts. The execution and delivery by Purchaser of this Agreement and the Related Purchaser Agreements and the performance by Purchaser of the transactions and obligations contemplated hereby and thereby do not and will not (a) violate, conflict with, contravene or constitute a breach or a default (or an event that, after the giving of notice or the lapse or time or both, would constitute a default) under any provision of (i) its certificate of incorporation, bylaws or other charter or organizational documents; (ii) any agreement among its shareholders or between Purchaser and its shareholders; (iii) any contract, agreement, obligation, understanding, commitment, note, security agreement, lease, loan agreement, debt instrument or other instrument or agreement to which Purchaser is a party or by which Purchaser or any of its assets is or may become bound; (iii) any license, approval, certificate, permit or authorization held by Purchaser; or (b) violate any applicable federal, state or local law, statute, rule, regulation or ordinance, or any order, injunction, writ, judgment, decree, or ruling of any court, arbitrator or Governmental Authority. Section 4.5 Consents. No Consent by any Person is necessary for Purchaser to execute and deliver this Agreement and the Related Purchaser Agreements, and to perform its obligations hereunder and thereunder. Section 4.6 Litigation. There are no Proceedings pending or, to the best of its knowledge, threatened by or before any court, arbitrator or Governmental Authority against Purchaser (i) in which any Person is seeking or is reasonably likely to seek to restrain or prohibit, or to obtain damages or other relief in connection with, this Agreement or the Related Purchaser Agreements or the transactions contemplated hereby or thereby, (ii) which if determined adversely to Purchaser would be reasonably likely to have a material adverse effect on Purchaser's ability to perform its obligations hereunder or to consummate the transactions contemplated hereby, (iii) which, if determined adversely to it, would be reasonably likely to have a material adverse effect on the assets, business, affairs, financial condition or operations of Purchaser or (iv) involving in whole or in part the issue of criminal liability by Purchaser or any of its officers, directors, employees or agents, or pertaining to its assets or business. Neither Purchaser nor any of its assets are subject to any outstanding judgment, order, writ, injunction or governmental or regulatory order or authority which would have a material adverse effect on this Agreement or any of the Related Purchaser Agreements. Purchaser is not presently engaged in any legal action to recover moneys due from damages caused by or to enforce its rights against any third party which would have a material adverse effect on this Agreement or any of the Related Purchaser Agreements. Section 4.7 Shares. The Shares have been validly authorized and, when issued as contemplated by this Agreement, will be validly issued, fully paid and non-assessable. Section 4.8 Capitalization of Purchaser. As of the date hereof, the authorized capital stock of Purchaser consists of 20,000,000 shares of Common Stock, par value $.01 per share, of which shares are issued and outstanding, and 6,000,000 of Preferred Stock, par value $.01 per share, of which shares are issued and outstanding. Section 4.9 Capitalization of NEWCO. As of the date hereof, the authorized capital stock of NEWCO consists of 1,000 shares of Common Stock, par value $.01 per share, of which 100 shares are issued and outstanding. Section 4.10 Financial Statements. In all material respects, the February 28, 1998 financial statements of Purchaser (including any notes thereto) were prepared in accordance with generally accepted accounting principles applied on a consistent basis through the periods covered thereby (except as disclosed in such financial statements), and fairly present in all material respects the consolidated financial condition of Purchaser as of the dates thereof and the consolidated results of Purchaser's operations and consolidated cash flow for the periods then ended, subject, in the case of any unaudited interim financial statements, to the omission of certain notes not ordinarily accompanying such unaudited financial statements, and to normal year-end adjustments. Section 4.11 Absence of Adverse Change. Since February 28, 1998, there has not been any material adverse change in the assets, business, affairs, operations, financial condition or operations of Purchaser. Section 4.12 No Brokers. No broker, finder, investment broker or similar agent is or shall be entitled to receive any fee, commission or other remuneration or compensation relating to the transactions contemplated by this Agreement based on any action taken by or on behalf of Purchaser. Section 4.13 Corporate Documents. Purchaser has furnished, or will furnish to Seller true and complete copies or originals, as the case may be, of the following documents: (i) the articles of incorporation and bylaws of Purchaser; and (ii), if requested, the minute books of Purchaser containing all records required to be set forth of all proceedings, consents, actions and meetings of the shareholders and board of directors (and all committees thereof) of Purchaser. Section 4.14 Compliance with Laws. To Purchaser's knowledge and belief it is and has been in material compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, rules, regulations, codes, licenses, permits, orders, judgments, decrees and other legal requirements (including, without limitation, those applicable to building, health, employment, labor, product liability, zoning, occupational safety, conservation, unfair competition, labor practices or corrupt practices) which affect or are applicable to its assets and business. Section 4.15 Full Disclosure. No representation, warranty or other statement by Purchaser in this Agreement, or in any schedule, exhibit, certificate, financial statement or other instrument or document furnished or to be furnished to Seller, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary in order to make any of the statements contained herein or therein, when taken as a whole, not false or misleading in any material respect in light of the circumstances in which they were made. There is no fact or circumstance known to Purchaser that materially adversely affects, or in the future may be reasonably expected to (insofar as Purchaser can now reasonably foresee) materially adversely affect, the assets or the properties, liabilities, business, affairs, operations, condition (financial or otherwise) or prospects of Purchaser that has not been set forth herein or otherwise described to Seller. Section 5. Pre-Closing Covenants. Section 5.1 Conduct of Business of Seller. (a) From the date of this Agreement until the Closing, Seller shall conduct its business only in the ordinary course consistent with past practices, including but not limited to (i) using its best efforts to (i) preserve intact its business organization and its good will, including its relationships with its suppliers, customers, lenders and others having business relationships with it, (ii) perform all its obligations in accordance with their terms, (iii) maintain the Assets in good operating condition, (iv) keep available the services of its present lessors, lessees, licensors, licensees, suppliers, customers, employees and agents, and (v) comply with all applicable laws, rules, regulations and orders. (b) Without limiting the generality of the foregoing, from the date of this Agreement until the Closing, Seller shall not, without the prior written consent of Purchaser: (i) Take any action referred to in Section 3.15(b) hereof; (ii) Take any action or omit to take any action which would breach any covenant or agreement of Seller herein; or (iii) Take any action which would cause any representation or warranty of Seller herein to be inaccurate in any material respect. Section 5.2 Access. (a) From the date of this Agreement through the Closing Date, Seller shall provide Purchaser and its officers, directors, employees and agents and representatives full access during normal business hours to the Assets and to the employees, agents, properties, books, contracts, accounts, commitments, records, tax returns and documents of Seller and shall furnish to Purchaser and its agents and representatives books, records, contracts, data and information concerning the Assets and the business and affairs of Seller as Purchaser and its agents and representatives may reasonably request. In the event that the transactions contemplated by this Agreement fail to be consummated, then Purchaser shall promptly return to Seller all data and information furnished to it and shall keep all such data and information confidential. No investigation pursuant to this Section 5.2(a) shall affect any representation or warranty of Seller or any condition to the closing obligations of Purchaser. (b) From the date of this Agreement through the Closing Date, Purchaser shall provide Seller and its officers, directors, employees and agents and representatives full access during normal business hours to the assets and to the employees, agents, properties, books, contracts, accounts, commitments, records, tax returns and documents of Purchaser and shall furnish to Seller and its agents and representatives data and information concerning the assets and the business and affairs of Purchaser as Seller and its agents and representatives may reasonably request. In the event that the transactions contemplated by this Agreement fail to be consummated, then Seller shall promptly return to Purchaser all data and information furnished to Seller and shall keep all such data and information confidential. No investigation pursuant to this Section 5.2(b) shall affect any representation or warranty of Purchaser or any condition to the closing obligations of Seller. Section 5.3 Risk of Loss. Until the Closing, Seller assumes all risk of loss, whether by reason of theft, fire, act of God, or other casualty, and Purchaser shall not be obligated to consummate the transactions contemplated hereby if there is any material loss of the Assets caused by any casualty, whether through the fault or negligence of Seller or otherwise. Section 5.4 Consummation of Transactions. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use its reasonable best efforts, and will cooperate with each other, to take, or cause to be taken, as promptly as practicable, all such actions and to do, or cause to be done, all other things necessary to carry out its obligations under this Agreement and under all other agreements contemplated by this Agreement and to consummate and make effective the transactions contemplated hereby and thereby, including obtaining all Consents which are necessary in connection with the transactions contemplated hereby and thereby, provided that Purchaser shall not be obligated to assume any additional liability of Seller or pertaining to the Assets other than the Assumed Liabilities. Section 5.5 Public Announcements. Until the Closing Date or the earlier termination of this Agreement for any reason, Purchaser and Seller shall consult with each other before issuing any press releases or otherwise making any public statements or disclosures with respect to this Agreement or the transactions contemplated hereby (directly or through affiliates) and shall not issue any such press release or make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld, except that a party hereto may make a public statement without such consent to the extent the same shall be required by applicable law, in which case such party should use its reasonable best efforts to advise the other party of such statement in a timely manner. Section 5.6 Notification of Certain Matters. From the date of this Agreement to the Closing Date, Purchaser and Seller each shall give prompt notice to the other of (a) the occurrence, or failure to occur, of any event, fact or circumstance the occurrence or failure of which would be reasonable likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect, or that breaches or is reasonably likely to breach any covenant or agreement set forth in this Agreement, and (b) any material failure on its part to comply with or satisfy any material covenant, condition or agreement to be complied with or satisfied by it hereunder. Section 5.7 Taxes. (a) Pre-Closing. Seller shall be responsible for the timely preparation of, all federal, state, local or foreign income, excise, withholding, property, sales, use, franchise and other tax returns, reports and forms of Seller pertaining to the Assets for all taxable periods ending on or before the Closing Date, and the payment of all amounts due thereunder. (b) Due to Transactions. Seller shall pay all federal, state and local sales, use, income, franchise, worker's compensation, unemployment documentary and other transfer taxes and fees arising out of the transfer of the Assets in accordance herewith, whether imposed by law on Seller or Purchaser, and shall pay its portion, prorated as of the Closing Date, of all federal, state, local and foreign personal property taxes relating to the Assets. Purchaser shall not be responsible for any business, occupation, withholding, or similar tax, or any taxes of any kind related to the Assets or the business being purchased for any period before the Closing Date. Seller shall indemnify, reimburse and hold Purchaser harmless in respect of any liability for payment of or failure to pay any such taxes or any filing of or failure to file any reports required in connection therewith. Section 5.8 No Shopping. From the date of this Agreement to the Closing Date, neither Seller, STOCKHOLDER nor any affiliates thereof shall, directly or indirectly, through any officer, director employee, agent or otherwise, solicit, initiate, or encourage the initiation or submission of inquiries, proposals or offers from, provide any information to, enter into any agreement with, or participate in any discussions or negotiations concerning any direct or indirect acquisition of any interest in Seller or any of the Assets (other than the sale of inventory and equipment in the ordinary course of business) by, any Person other than Purchaser. Seller shall immediately notify Purchaser of, and communicate to Purchaser the terms of any such inquiry, proposal or offer that Seller may receive. Section 5.9 Employee Matters. (a) Seller will pay, and remain responsible after the Closing, to all its employees for all compensation and benefits, including wages, salaries, commissions, bonuses, deferred compensation, severance, termination, insurance, pensions, profit-sharing, vacation, sick pay and other compensation or benefits ("Seller Employees Compensation") to which they are entitled for periods prior to the Closing Date. Until the Closing Date, Seller will not, without the prior written consent of Purchaser, change the compensation or benefits of any of its employees. (b) Purchaser is not assuming and shall have no obligation to pay any Seller Employees Compensation, whether accruing before, as a result of, or after the Closing. Seller shall perform, and Purchaser is not assuming and shall have no obligation to perform, any severance or termination obligations, liabilities and commitments accruing or arising by agreement, plan or policy of Seller as a result of the transactions contemplated hereby. (c) At Closing, the Purchaser shall enter into employment agreements with Mahesh Khatwani and Gary Prioste. The Purchaser shall have no obligation to, offer employment to any other current employees of Seller. Any employee of Seller considered for employment by Purchaser, other than Mahesh Khatwani or Gary Prioste, shall be subject to Purchaser's normal application and screening procedure and, if hired, shall be eligible for Purchaser's compensation and benefits policies. No provisions of this Agreement, express or implied, shall confer on any employee or former employee of Seller, other than Mahesh Khatwani or Gary Prioste, any right to employment or any continued right to employment for any extended period. (d) All claims and obligations under, pursuant to or in connection with any Employee Plans of Seller or arising under any legal requirement affecting employees of Seller incurred on or before the Closing Date resulting in or arising from events or occurrences occurring or commencing on or prior to the Closing Date shall remain the responsibility of Seller, whether or not such employees are hired by Purchaser after the Closing. Purchaser will have and assume no obligation or liability under or in connection with any such plan and will assume no obligation with respect to any pre-existing condition of any employee of Seller who is hired as an employee of Purchaser, except as required by applicable law. (f) Subject to the terms of the Amended and Restated Stockholder's Agreement, Purchaser covenants and agrees that it will reserve shares of Purchaser's Common Stock valued at up to five percent (5%) of the total amount of Initial Consideration for issuance upon exercise of options (the "ITP Options") granted from time to time to employees of NEWCO on and after the Closing Date as deemed appropriate by the management of NEWCO. The parties hereto agree that all of the ITP Options issued to employees of NEWCO within thirty (30) days of the Closing Date will have an exercise price equal to $5.90 per share and that any ITP Options issued after that date will have an exercise price equal to the Fair Market Value at the time of exercise. Section 5.10 Assumed Warranty Obligations. A complete and accurate list of certain warranty obligations of Seller for all equipment and products sold by Seller within two years prior to the Closing Date with respect to the Business (by customer, amount, sale and type of equipment or services) is set forth on Schedule 5.10 hereto. Section 5.11 Release of Liens. Contemporaneously with or prior to the Closing, Seller shall take all action necessary to cause any Liens on or against the Assets to be released and terminated as of the Closing date. Section 6. Conditions Precedent to Purchaser's Closing Obligations. The obligations of Purchaser to purchase the Assets and to assume the Assumed Liabilities and to take the other actions contemplated hereby to be taken by Purchaser at or prior to the Closing are subject to the satisfaction (unless waived in writing by Purchaser), at or prior to the Closing, of each of the following conditions. Section 6.1 Business Conduct. Except as set forth on Schedule 6.1, since February 28, 1998, there has not been a Material adverse change in the Seller's operations, condition (financial or otherwise), operating results, assets, liabilities, employee, customer or supplier relations or business prospects. Section 6.2 Accuracy of Representations and Warranties. Each and every representation and warranty made by Seller in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as if made or given on the Closing Date. Section 6.3 Performance of Covenants. Seller shall have performed, satisfied and complied with all covenants, agreements, obligations and conditions under this Agreement which are to be performed, satisfied or complied with by Seller at or prior to the Closing. Section 6.4 No Litigation. No Proceeding shall be pending or overtly threatened by or before any court, arbitrator or Governmental Authority (a) which seeks the restraint, prohibition or the obtaining of damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, (b) which questions the legitimacy, validity or enforceability of this Agreement or the transactions contemplated hereby or (c) which, if successful, would have a Material Adverse Effect on the Assets or the Business or would materially and adversely affect the ability of Purchaser to consummate the transactions contemplated hereby or to operate the Business substantially as currently operated. Section 6.5 Deliveries at Closing. Seller shall have delivered to Purchaser at the Closing the Assets and each of the certificates, instruments, documents and agreements required to be delivered to Purchaser hereunder or reasonably necessary to consummate the transactions contemplated hereby. Section 6.6 Consents. All Consents of any Person necessary to permit the consummation of the transactions hereby shall have been duly obtained, made or taken prior to the Closing. Section 6.7 Condition of Assets. No event or change in circumstances, including but not limited to fire, accident, storm, or other casualty or labor or civil disputes or act of God or public enemy, shall have occurred (whether or not insured against) that in the reasonable judgment of Purchaser has or is reasonably likely to have a material adverse effect on the Assets or the value thereof or on the Business. Section 6.8 Employment Agreements. Purchaser shall have entered into a Senior Executive Employment Agreement with Mahesh Khatwani and Gary Prioste pursuant to the terms and conditions of such agreement attached hereto as Annex III. Section 7. Conditions Precedent to Seller's Closing Obligations. The obligations of Seller to sell and deliver the Assets to Purchaser and to perform its other obligations contemplated hereby to be taken at or prior to the Closing are subject to the satisfaction (unless waived in writing by Seller), at or prior to the Closing, of each of the following conditions: Section 7.1 Business Conduct. Except as set forth on Schedule 7.1, since February 28, 1998, there has not been a Material adverse change in the Purchaser's operations, condition (financial or otherwise),operating results, assets, liabilities, employee, customer or supplier relations or business prospects. Section 7.2 Accuracy of Representations and Warranties. Each of the representations and warranties made by Purchaser in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as if made or given on the Closing Date. Section 7.3 Performance of Covenants. Purchaser shall have performed, satisfied and complied with all of the covenants, agreements, obligations and conditions under this Agreement which are to be performed, satisfied or complied with by Purchaser at or prior to the Closing. Section 7.4 No Litigation. No proceeding shall be pending or overtly threatened before any court, arbitrator or Governmental Authority which seeks the restraint, prohibition or the obtaining of damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, which questions the legitimacy, validity or enforceability of this Agreement or the transactions contemplated hereby or which, if successful, would have a material adverse effect on the Purchaser's assets or business or would materially and adversely affect the ability of Purchaser to consummate the transactions contemplated hereby or for Purchaser to operate its business substantially as currently operated. Section 7.5 Deliveries at Closing. Purchaser shall have delivered to Seller at the Closing the Consideration pursuant to Section 2.1 herein and each of the other certificates, instruments, documents and agreement required to be delivered to Seller hereunder. Section 7.6 Employment Agreements. Purchaser shall have entered into a Senior Executive Employment Agreements with Mahesh Khatwani and Gary Prioste pursuant to the terms and conditions of such agreement attached hereto as Annex III. Section 8. The Closing. Section 8.1 Date and Place. The consummation of the sale and purchase of the Assets contemplated hereby (the "Closing") shall take place at the offices of Swidler & Berlin, Chartered at 3000 K Street, N.W., Washington, D.C. at ten a.m. local time, on June 12, 1998, or at such other time, date or place as the parties shall mutually agree (the "Closing Date"). For accounting purposes, this Agreement shall be treated as if it closed on June 1, 1998. Section 8.2 Deliveries by Seller. At the Closing, Seller and STOCKHOLDER shall deliver or cause to be delivered to Purchaser, in form reasonably acceptable to Purchaser's counsel: (a) Full, actual and unimpeded possession and enjoyment of the Assets; (b) Assignments and assumptions of all Assigned Contracts being assumed by and assigned to Purchaser, duly executed by Seller, along with all consents required to permit such assignment and assumption; (c) One or more duly executed bills of sale warranting good and marketable title in and to the Assets, and such other instruments of sale, conveyance, assignment and transfer as may be reasonably requested by Purchaser, in order to vest in Purchaser all of Seller's right, title and interest in and to all of the other Assets, free and clear of all Liens, Consents, restrictions or obligations to any third party, of any kind whatsoever; (d) All assignments required to transfer any Intellectual Property to Purchaser; (e) All Consents necessary to permit the consummation of the transactions contemplated by this Agreement; (f) All releases of all Liens encumbering any of the Assets; (g) True and complete copies of corporate resolutions, certified as of the Closing Date by the Secretary of Seller as having been duly adopted by the Board of Directors and, if necessary, shareholders of Seller authorizing Seller's and STOCKHOLDER'S execution and delivery of this Agreement and the Related Seller Agreements and their consummation of the transactions contemplated hereby and thereby; (h) Certificates duly executed by the President or Chief Executive Officer of Seller and by STOCKHOLDER, dated as of the Closing Date, certifying that, to the best of their knowledge and belief after due inquiry, (i) each of Seller and STOCKHOLDER, respectively, has fully performed, satisfied and complied with all agreements, obligations, covenants and conditions required by this Agreement to be performed, satisfied or complied with at or prior to the Closing, and (ii) all of the representations and warranties of Seller and STOCKHOLDER, respectively, set forth in Section 3 of this Agreement are true and correct as of the Closing Date; (i) An opinion of counsel for Seller and STOCKHOLDER, dated as of the Closing Date, substantially in the form attached hereto as Annex I; (j) Senior Executive Employment Agreements, duly executed by the respective STOCKHOLDER; (k) STOCKHOLDER shall have delivered to Purchaser an instrument dated the Closing Date releasing Purchaser and NEWCO from any and all obligations to the STOCKHOLDER, except for (x) continuing obligations to the STOCKHOLDER relating to his employment by NEWCO and (y) obligations arising under this Agreement or the transactions contemplated hereby; (l) Seller shall have executed a Subordination Agreement substantially in the form attached hereto as Annex VII and Annex VIII relating to the First Note, and the Convertible Note, respectively, and will execute a Subordination Agreement for the Second Note and the Second Convertible Note, if any; and (m) All other items required to be delivered by Seller or STOCKHOLDER pursuant to any provision of this Agreement. Section 8.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to Seller, in form reasonably acceptable to Seller's counsel: (a) The Cash Portion of the Purchase Price as set forth in Section 2.1(a)(i) hereof, by cashier's or certified bank check or wire transfer of immediately available funds to an account designated by Seller; (b) The Convertible Note, duly executed by Purchaser; (c) The First Note, duly executed by Purchaser; (d) True and complete copies of corporate resolutions, certified as of the Closing Date by the Secretary of Purchaser as having been duly adopted by the Board of Directors of Purchaser, respectively, authorizing Purchaser's execution and delivery of this Agreement and the Related Purchaser Agreements and their consummation of the transactions contemplated hereby and thereby; (e) Certificates duly executed by the Chairman of the Board, President or Chief Executive Officer of Purchaser, dated as of the Closing Date, certifying that, to the best of their knowledge and belief after due inquiry, (i) Purchaser has fully performed, satisfied and complied with all agreements, obligations, covenants and conditions required by this Agreement to be performed, satisfied or complied with by Purchaser at or prior to the Closing, and (ii) all of the representations and warranties of Purchaser set forth in Section 4 of this Agreement are true and correct as of the Closing Date; (f) An opinion of counsel for the Purchaser, dated as of the Closing Date, substantially in the form attached hereto as Annex II; and (g) All other items required to be delivered by Purchaser pursuant to any provision of this Agreement. Section 8.4 Effectiveness of Closing. No action to be taken or delivery to be made at the Closing shall be effective until all of the actions to be taken and deliveries to be made at the Closing are complete. Section 9. Survival and Indemnification. Section 9.1 Survival. The indemnification obligations and the representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing and shall continue in full force and effect until they expire on the second anniversary of the Closing Date (or such later date as expressly provided herein), regardless of any investigation made by any party hereto, except as to any Claims relating to fraud, environmental, intellectual or tax matters, which claims shall expire only upon expiration of the applicable statute of limitations. No Claim pursuant to this Section 9 shall be asserted by any party hereto after the expiration of the applicable survival period or statute of limitations, as the case may be, except for Claims made in writing prior to such expiration or actions (whether instituted before or after such expiration) based on any Claim made in writing prior to such expiration. Section 9.2 Indemnification by the Seller and STOCKHOLDER. Seller and STOCKHOLDER shall jointly and severally indemnify, defend And hold harmless Purchaser, NEWCO, their affiliates, successors and assigns, and the officers, directors, shareholders, partners, employees, agents and representatives of any of them, harmless from and against, any and all claims, actions, suits, proceedings demands, losses, expenses, obligations, taxes, liabilities, damages, recoveries and deficiencies (including, without limitation, interest, fines, penalties, costs of investigation, reasonable attorneys', accountants' and other professionals' fees and expenses and amounts paid in settlement) (collectively, "Damages") arising out of, based upon or resulting from (i) any breach or violation of, inaccuracy or misrepresentation in, or failure by the Seller or STOCKHOLDER to perform, any representations, warranties, covenants, agreements or other obligations of Seller or STOCKHOLDER made in this Agreement or in any schedule, certificate, exhibit, annex or other document or instrument furnished or to be furnished by Seller or STOCKHOLDER to Purchaser pursuant to this Agreement, (ii) any debt, liability or obligation of Seller or STOCKHOLDER not included in the Assumed Liabilities, (iii) any failure by Seller or STOCKHOLDER to completely and timely comply with all applicable provisions of (A) any WARN or similar state or local laws or (B) the fraudulent transfer or fraudulent conveyance laws of any jurisdiction, (iv) any statute or common law doctrine of de facto merger or successor liability or (v) any product liability claims relating to products made or sold or services performed by Seller or STOCKHOLDER prior to the Closing Date. In the event of a Claim for Damages pursuant to this Section 9.2, STOCKHOLDER and Seller's liability for such Claim for Damages shall be limited to an amount not to exceed the maximum amount of the Initial Consideration received by the STOCKHOLDER or Seller as of the date such Claim for Damages is made. Notwithstanding the foregoing, any adjustment to the Working Capital balance as of the Closing Date pursuant to Section 2.2 above shall not constitute a basis for a further Claim for Damages hereunder. Section 9.3 Indemnification by Purchaser. Purchaser shall indemnify, defend and hold harmless Seller and STOCKHOLDER, their affiliates, successors and assigns, and the officers, directors, shareholders, partners, employees, agents and representatives of any of them, from and against, any and all Damages arising out of, based upon or resulting from any breach or violation of, inaccuracy or misrepresentation in, or failure by Purchaser to perform, any of the representations, warranties, covenants, agreements or other obligations of Purchaser made in this Agreement or in any schedule, certificate, exhibit, Annex or other document or instrument furnished or to be furnished by Purchaser to Seller or STOCKHOLDER pursuant to this Agreement. Section 9.4 Claims for Indemnification. (a) Whenever any party hereunder believes it has suffered or incurred or is likely to suffer or incur any Damages, or any action or proceeding is commenced or threatened or claim is made that could result in Damages, which is reasonably likely to give rise to a claim ("Claim") for indemnification under this Agreement, the party seeking indemnification ("Indemnified Party") shall, upon obtaining knowledge thereof, promptly notify in writing the party against whom indemnification is sought ("Indemnifying Party") of the Claim and, when known, the facts constituting the basis for such Claim and the amount and nature of the Damages or an estimate thereof. The Indemnified Party's failure to timely notify Indemnifying Party of any Claim or potential Claim shall not relieve the Indemnifying Party of any liability hereunder unless and only to the extent that such failure causes Indemnifying Party to lose the right to assert any substantive rights or defenses or to the extent that the Indemnifying Party is actually prejudiced in its rights or obligations. (b) The Indemnified Party shall give the Indemnifying Party a reasonable opportunity to participate in and to assume the defense of any such Claim at the Indemnifying Party's own expense and with counsel of the Indemnifying Party's own selection reasonably satisfactory to the Indemnified Party provided, however, that Indemnified Party shall at all times also have the right but not the obligation, to fully participate in the defense of the Claim and to employ its own counsel at its own expense. Notwithstanding the foregoing, if the Indemnified Party reasonably determines that: (i) legal defenses may be available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party, (ii) a conflict or potential conflict of interest exists between the Indemnified Party and the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such Claim on behalf of the Indemnified Party), or (iii) the Indemnifying Party has not in fact employed legal counsel to assume the defense of such Claim within a reasonable time after receiving notice of the Claim, then the reasonable fees, disbursements and other charges of counsel from one separate firm selected by the Indemnified Party (and reasonably acceptable to the Indemnifying Party) shall be reimbursed by the Indemnifying Party promptly as they are incurred. (c) No party hereto shall compromise, settle or consent to the entry of any judgment with respect to any Claim without the prior written consent of the other interested party or parties (which consent shall not be unreasonably withheld or delayed) unless such compromise, settlement or consent includes an unconditional release of all other interested parties hereto from any and all liabilities on any Claims that are the subject matter thereof. (d) Each party hereto shall cooperate in every reasonable way with the party assuming responsibility for the defense and disposition of any such Claim, including making available to the defending party all books, records, and other material reasonably required by the defending party for its use in defending the Claim. Section 9.5 Limitation on Liability. (a) Notwithstanding the foregoing, the Indemnifying Party shall not be required to indemnify the Indemnified Party hereunder unless and until the aggregate amount of all Damages exceeds $75,000.00. (b) Neither party shall seek or be entitled to consequential damages or damages for lost profits in any Claim for indemnification under this Section 9 nor shall it accept payment of any award or judgment against the other party to the extent that such award or judgment includes consequential damages or damages for lost profits. Section 9.6 Non-Exclusive Indemnification. The foregoing indemnification provisions are in addition to, and not in derogation of, or statutory, equitable or common law remedies any party hereto may have for any breach of representation, warranty, covenant or agreement. Section 9.7 Effect of Knowledge. No disclosure to and no investigation by or on behalf of any party hereto, other than disclosures made in the Schedules hereto, shall be deemed to affect its reliance on the representations, warranties, covenants and agreements contained herein or to waive its rights to indemnification as provided herein for the breach or violation of or inaccuracy or failure to perform or comply with any representation, warranty, covenant or agreement of any other party hereto. Section 9.8 Contribution. If the indemnification provided for in this Section 9 is for any reason unavailable or insufficient to indemnify the Indemnified Party in respect of any Damages, then the Indemnifying Party shall in lieu of indemnifying the Indemnified Party contribute to the total damages to which the Indemnified Party may be subject in such proportion that shall be appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, in connection with any actions or omissions which resulted in such Damages as well as any other relevant equitable considerations; provided, however, that the amount of any such contribution obligation shall not exceed what would otherwise be the amount of the Indemnifying Party's indemnification obligation hereunder. Section 10. Post-Closing and Other Covenants. Section 10.1 Further Assurances. At the Closing, Seller, through its officers directors, employees and agents, shall put Purchaser into full, actual and unimpaired ownership, possession, enjoyment and control of the Assets. At any time and from time to time after the Closing, Seller shall, at the sole expense of purchaser, execute, acknowledge and deliver any further deeds, assignments, conveyances, consents, permits and other assurances, documents and instruments of transfer reasonably requested by Purchaser, and take any and all further actions consistent with the terms of this Agreement, that may be reasonably requested by Purchaser for the purpose of more effectively and fully assigning, transferring, granting and conveying to and vesting in Purchaser all of Seller's right, title and interest in and to, or reducing to possession, any or all of the Assets. If requested by Purchaser, Seller shall, solely at Purchaser's expense (unless required due to a breach of any representation, warranty, or covenant hereof by Seller), prosecute or otherwise enforce in its own name for the benefit of Purchaser any claims, rights or benefits that are transferred to Purchaser by this Agreement and require prosecution and enforcement in Seller's name. Section 10.2 Preservation of Files and Records. (a) By Purchaser. For a period of 3 years after the Closing Date, Purchaser shall preserve all files and records relating to the Business and the Assets that are in existence as of the Closing Date and that are less than 5 years old as of the Closing Date, and shall allow Seller access to such files and records and the right to make copies and extracts therefrom at any time during normal business hours, and shall not dispose of any thereof, provided that at any time after the Closing, Purchaser may give Seller written notice of its intention to dispose of any part thereof, specifying the items to be disposed of in reasonable detail. Seller may, within a period of sixty (60) days after receipt of any such notice, notify Purchaser of Seller's desire to retain one or more of such items to be disposed of. Purchaser shall, upon receipt of such notice from Seller, deliver to Seller at Seller's expense, the items specified in Purchaser's notice to Seller which Seller has elected to retain. (b) By Seller. For a period of three (3) years after the Closing Date, Seller shall preserve all files and records relating to the Business and the Assets that are in existence as of the Closing Date not otherwise delivered to Purchaser and that are less than five (5) years old as of the Closing Date, and shall allow Purchaser access to such files and records and the right to make copies and extracts therefrom at any time during normal business hours, and shall not dispose of any thereof, provided that at any time after the Closing, Purchaser may give Seller written notice of its intention to dispose of any part thereof, specifying the items to be disposed of in reasonable detail. Purchaser may, within a period of sixty (60) days after receipt of any such notice, notify Seller of Purchaser's desire to retain one or more of such items to be disposed of. Purchaser shall, upon receipt of such notice from Seller, deliver to Purchaser at Purchaser's expense, the items specified in Purchaser's notice to Seller which Purchaser has elected to retain. Section 10.3 Mutual Cooperation. (a) Preparation of Reports, Etc. Each of Purchaser and Seller shall cooperate and cause its respective employees and agents to cooperate with each other in the preparation of financial and other reports and statements relating to the Business and the Assets for periods ending on or prior to the Closing. (b) Taxes and Other Matters. In connection with the preparation of any tax returns, any audit or other examination by any taxing or other Governmental Authority, or any Proceeding or other matters including but not limited to, environmental and other matters relating to the transactions contemplated by this Agreement, each party will provide the other with the opportunity to make copies of any records or information which may be relevant to such return, audit or examination, Proceeding or determination. Each party shall make its employees available on a mutually convenient and reasonable basis to provide additional information and explanation of any material provided hereunder. (c) Cooperation in Litigation. In the event that, after the Closing Date, Seller or Purchaser shall reasonably require the participation of officers and employees by each other to aid in the defense or prosecution of litigation or claims, and so long as there exists no unwaived conflict of interest between the parties, each of Seller and Purchaser shall make such officers and employees reasonably available to participate in such defense or prosecution provided that, except as required pursuant to the provisions herein, the party requiring the participation of such officers and employees shall pay all reasonable out-of-pocket costs, charges and expenses arising from such participation. Section 10.4 Solicitation and Hiring. (a) STOCKHOLDER's Covenant. For a period of two (2) years after the Closing Date, STOCKHOLDER, shall not, directly or indirectly, as a stockholder, investor, partner, director, officer, employee or otherwise (i) solicit or attempt to induce any employee to terminate his or her employment with NEWCO or Purchaser, or (ii) hire or attempt to hire any employee of Purchaser. Section 11. Termination and Confidentiality. Section 11.1 Events of Termination. This Agreement may be terminated at any time prior to the Closing as follows: (a) By mutual written agreement of Seller and Purchaser; (b) By Seller or Purchaser if (i) the non-terminating party shall have failed to perform, satisfy or comply with any of its, obligations, agreements, or covenants to be performed, satisfied, or complied with hereunder prior to the Closing, or (ii) the non-terminating party materially breaches any of its representations, warranties or covenants hereunder; (c) By any party hereto by giving written notice to the other parties hereto if the Closing Date has not occurred on or before July 15, 1998, unless such party's intentional failure to fulfill any obligation hereunder has been the cause of, or has resulted in, the failure of the Closing to occur on or before such date; or (d) By Purchaser or Seller if any court or Governmental Authority of competent jurisdiction shall have issued an order, judgment, decree, ruling or taken other action restraining, enjoining or otherwise prohibiting the transaction contemplated hereby. Section 11.2 Effect of Termination. If any party terminates this Agreement in accordance with Section 11.1, then all rights and obligations of the parties shall cease, except for the obligations set forth in Sections 11.3 and 12.2 which shall survive such termination; provided, however, that any termination of this Agreement shall not affect the rights or either Seller or Purchaser against the other for breach of any representation, warranty, covenant or agreement set forth in this Agreement. Section 11.3 Confidentiality. Notwithstanding the provisions of this Section 11, if for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall keep confidential any information obtained from any other party to this Agreement (except information publicly available or in such party's domain prior to the date hereof, and except as required by court order) and shall not use any such information to the detriment of the other party and shall promptly return to the other party all schedules, documents, instruments, work papers or other written information, without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herewith. Section 12. General Provisions. Section 12.1 Governing Law. This Agreement shall in all respects be governed by and ----------- construed and enforced in accordance with the internal substantive laws of the State of Maryland, without giving effect to any principle or rule of conflict or choice of laws. Any action suit, or other proceeding seeking to enforce any right, remedy, obligation, duty, covenant or provision of, or arising out of, this Agreement shall be brought and entered against any party hereto exclusively in any federal or state court of the State of California or of the United States located in the State of California. Each party hereto irrevocably submits to the personal jurisdiction of any such court and irrevocably waives, to the fullest extent of the law, any objection that it may now or hereafter have to the laying of venue in any such court and any claim that such action, suit or proceeding has been brought in an inconvenient form. Section 12.2 Expenses. Except as expressly provided herein, each of the parties to this Agreement agrees to pay its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including the fees and expenses of its counsel, accounting and other advisers and agents. Section 12.3 Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned or transferred by any party hereto without either party giving at least ninety (90) days prior written notice to all other parties hereto, provided, however, that Purchaser may, without providing notice to Seller, sell, assign, transfer or delegate its rights or obligation, under this Agreement to NEWCO or any of its affiliates, in which case such assignee or transferee shall be substituted for Purchaser hereunder as though it was the original party to this Agreement, and Purchaser shall be released from all its obligations under this Agreement. Section 12.4 Amendments. This Agreement may not be supplemented, amended or modified in any manner in whole or in part except by a writing signed by all parties to this Agreement that specifically states that it amends this Agreement. Section 12.5 Notices. Any and all notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given hereunder if delivered personally, or if sent by facsimile transmission (upon receipt of confirmation of delivery), on the next business day if sent by overnight courier service, or three business days after being sent by first class (registered/certified) mail, postage prepaid, return receipt requested, to the parties at the following addresses: If to Purchaser: 9881 Broken Land Parkway Suite 102 Columbia, Maryland 21046 Attn: Daniel J. Klein Telephone: (410) 309-9800 Facsimile: (410) 309-9801 With a copy to:Swidler & Berlin, Chartered 3000 K Street, N.W. Suite 300 Washington, D.C. 20007 Attn: Andrew M. Ray Douglas C. Boggs Telephone: (202) 424-7782 Facsimile: (202) 424-7645 If to STOCKHOLDER: Mahesh Khatwani 393 Grand Avenue South San Francisco, California 94080 With a copy to: Orton E. Snyder, Esquire 19925 Stevens Creek Blvd. Cupertino, California 95014 Telephone: (408) 725-7542 Facsimile: (408) 244-8017 Any party may change its designated address by giving written notice thereof to all other parties hereto in the manner provided in this Section 12.5. Any party hereto may send any notice, request, demand, or other communication to the intended recipient at the address above by using any other means (such as telecopy, telex, expedited courier, messenger, ordinary mail or electronic mail), but no such notice, demand, request or other communication shall be deemed to have been given until it is actually received by the recipient. Section 12.6 Waiver. The obligations of any party hereto may be waived only with the written consent of the party giving the waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any provision of this Agreement on one or more occasions shall not be considered a continuing waiver or deprive that party of the right thereafter to insist upon strict adherence to that provision or any other provision of this Agreement. Section 12.7 Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any situation, the balance of this Agreement shall remain in effect, and such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of that provision in any other situation or legality, validity or enforceability of any other provision of this Agreement. Section 12.8 Headings. The headings used in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. Section 12.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and ----------------- their respective successors and permitted assigns. Section 12.10 Pronouns, etc. The number and gender of each pronoun used in this Agreement and the term "person" or "persons" or the like shall be construed to mean both the number and gender of the individual, corporation, limited liability company, partnership, firm, trust, agency and other entity as the context, circumstance or its antecedent may require. The terms "herein," "hereof," "hereby," "hereto" and the like refer to this Agreement as a whole. Section 12.11 No Third Party Beneficiaries. Except as expressly provided in this Agreement, this Agreement does not confer or create, is not intended by the parties hereto to confer or create, and shall not be construed as conferring or creating, upon any person or entity other than the parties hereto and their successors and permitted assigns any rights, remedies or causes of action under or by reason of this Agreement. Section 12.12 Schedules, Exhibits and Annexes. The schedules, exhibits and annexes attached to this Agreement are incorporated into and made a part of this Agreement as if they were fully set forth herein. Section 12.13 Specific Performance; Cumulative Remedies. The parties hereto acknowledge and agree that the transactions contemplated by this Agreement are unique in that remedies at law for any breach or threatened breach of this Agreement would be an inadequate remedy for any loss, and that any defense in any action for specific performance that a remedy at law would be adequate is hereby specifically waived. Accordingly, in the event of any actual or threatened breach to any of the terms of this Agreement, the non- breaching party shall have the right of specific performance and injunctive relief giving effect to its rights under this Agreement, in addition to any and all other rights and remedies, at law or in equity, and all such rights and remedies are cumulative. Section 12.14 Counterparts. This Agreement may be executed in one or more counterparts, including counterparts executed by less than all parties hereto, by facsimile or otherwise, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 12.15 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements, agreements and understandings, whether oral or written, among the parties hereto in connection with the subject matter of this Agreement. (Next page is the Signature Page). IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be executed and delivered by their duly authorized officers as of the date first above written. PURCHASER: IT PARTNERS, INC. By:/s/ Daniel J. Klein ---------------------------- Daniel J. Klein SELLER: SERVINET CONSULTING GROUP, INC. By: /s/Mahesh Katwani ----------------------------- Title: President STOCKHOLDER: By: /s/Mahesh Katwani ----------------------------- Mahesh Khatwani By:/s/ Gray Drohan ----------------------------- Gary Prioste By:/s/ Gray Drohan ------------------------------ Gray Drohan By:/s/ Keith Matsunaga ----------------------------- Keith Matsunaga EX-10.2 11 ASSET PURCHASE AGREEMENT - ------------------------ THIS ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into as of the day of , 1998, by and among CALL BUSINESS SYSTEMS,INC., a ----- ------- Utah corporation ("Seller"), STANTON L. CALL ("STOCKHOLDER") and IT PARTNERS, INC. a Delaware corporation ("ITP" or "Purchaser"). W I T N E S S E T H: WHEREAS, Seller is, among other things, engaged in the business of selling and installing technology software and providing related consulting services (the "Business"); and WHEREAS, Seller desires to sell and Purchaser desires to purchase certain assets of Seller, upon the terms and subject to the conditions set forth herein; WHEREAS, immediately following the Closing, the Purchaser shall sell, assign, transfer, convey and deliver and ITP No. 7, Inc., a Delaware corporation and wholly owned subsidiary of Purchaser ("NEWCO"), shall purchase and acquire all of Purchaser's right title and interest in the Assets and Assumed Liabilities (as such terms are defined herein) (the "Drop Down"); and WHEREAS, the parties hereto desire to enter into certain other covenants among themselves as an inducement to and in connection with the execution, delivery and performance of this Agreement; AGREEMENT: NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, representations and warranties set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows: Section 1. Sale and Purchase of the Assets ------------------------------- Section 1.1 Sale and Purchase. At the Closing (as defined below), upon the terms and subject to the conditions set forth in this Agreement, Seller shall sell, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase and acquire from Seller, all of Seller's right, title and interest in and to all the assets of Seller of every kind, character and description, whether now owned or hereafter acquired by Seller prior to the Closing Date, whether tangible or intangible, and whether real, personal or mixed, and wherever located, which are owned, used or held for use in connection with, generated by, derived from or attributable to, or otherwise related to, the Business (excluding the Excluded Assets (as defined in Section 1.2 hereof) (all of which are collectively referred to herein as the "Assets"), including, but not limited to, all of the following: (a) all equipment, machinery, vehicles, office furniture, fixtures, tools, dies, spare parts, appliances, computer hardware, equipment and supplies, and other similar tangible personal property, including, without limitation, the personal property and equipment set forth on Schedule 1.1(a) hereto; (b) all inventories, including, without limitation, raw materials, work in process, finished goods, inventories held by customers on a consignment basis, stores, supplies, materials and manufactured and purchased parts, but excluding all items of inventory rejected by Purchaser because of Purchaser's determination that they are either not related to the Business, or are obsolete or inappropriately valued; (c) all patents, trademarks, trade names, service marks and copyrights, and all applications, registrations, extensions, reissues and continuations thereof, all licenses and sublicenses with respect thereto, all rights thereunder, and all remedies against infringement thereof, including without limitation those items set forth on Schedule 1.1(c) hereto; (d) all technologies, materials, formulations, data bases, trade secrets, secret processes, know how, inventions and other intellectual property and intangible property of every kind and nature; (e) all computer software (including documentation and related object and source codes); (f) all rights and interests under orders, bids, quotations and similar arrangements relating to the purchase or sale of Seller's goods and services, to the extent not fulfilled prior to the Closing Date; (g) all rights and interests under licenses, contracts, agreements, leases or commitments, including without limitation, contracts providing for the lease of equipment, machinery, office equipment, furniture and vehicles, sales representative agreements, distributor agreements, consignment agreements and other similar agreements, whether as principal or agent or distribution, to the extent (i) transferable to Purchaser and (ii) set forth on Schedule 1.1(g) hereof ("Assigned Contracts"); (h) all franchises, approvals, permits, licenses, qualifications, authorizations, orders, registrations, certificates, variances, and similar rights obtained from or issued by any Governmental Authority (as defined in Section 3.5 below), and all pending applications therefor; (i) all rights and interests of Seller under all warranties, guarantees and covenants not to compete for the benefit of the Business or the Assets; (j) all books, records, accounts, ledgers, files, data, documents, forms, correspondence, lists, plats, architectural plans, drawings, specifications, creative materials, advertising and promotional literature and materials, studies, reports, and other printed, written, machine readable, electronic or computer-generated materials to the extent they relate to the Assets or the Business; (k) the Accounts Receivable of Seller; (l) the name "Call Business Systems, Inc" and all variations and derivations thereof; and (m) the Business as a going concern and all goodwill associated therewith. Section 1.2 Excluded Assets. Notwithstanding any provision in Section 1.1 or - ------------ elsewhere herein to the contrary, the Assets shall not include any of the following: (a) those Assets disposed of in the ordinary course of business as permitted by this Agreement; (b) all matters pertaining to Seller's corporate existence including minute books, stock transfer books, tax returns, and tax identifications, books of account and other records pertaining to Seller's corporate organization; (c) the consideration and all other rights accruing to Seller under this Agreement; (d) the amount of cash in excess of $140,000.00 in working capital, which shall be the minimum amount of cash on hand as of the Closing Date (the "Working Capital"). If the Working Capital cash requirements shall be in excess of $140,000.00 during the period between Closing and ninety (90) days thereafter (the "Working Capital Adjustment Period"), then Stockholder shall contribute such excess funds to Working Capital. If the Purchaser determines that the Working Capital shortfall is due to a delay in the timely payment of accounts receivable or the prepayment of an expense not in the ordinary course of business, then Purchaser shall reimburse Stockholder the amount paid to cover such shortfall. During the Working Capital Adjustment Period, Stockholder covenants and agrees to operate NEWCO's business in accordance with Seller's past practices and to collect or expense accounts payable, accounts receivable and payroll in accordance therewith. At the conclusion of the Working Capital Adjustment Period, Purchaser shall perform a limited review (the "Working Capital Review") of NEWCO's accounts payable, accounts receivable and payroll practices for the period ending on the last day of the Working Capital Adjustment Period to verify that NEWCO operated in accordance with Seller's past practices and in accordance with its vendor contract terms and payroll policies. If Purchaser determines that the Stockholder operated NEWCO in a manner that has not been authorized by Purchaser, or if Purchaser determines that the Stockholder operated NEWCO in violation of the covenants hereinabove in a manner calculated to avoid a Working Capital shortfall during the Working Capital Adjustment Period, then Stockholder shall remit to Purchaser the amount of income improperly accelerated, or expense improperly deferred, as determined in accordance with Purchaser's Working Capital Review; and (e) the rights to all of Seller's claims for any federal, state, local or foreign tax refunds or adjustments; (f) any rights and interests of Seller under contracts, agreements and commitments that are not set forth on Schedule 1.1(g); and (g) items of personal property, including furniture in the office of Stockholder. Section 1.3 Liabilities. (a) Notwithstanding any other provision herein to the contrary, Purchaser is not assuming and shall have no obligation to pay, perform or discharge any liabilities, debts, accounts payable or other obligations of Seller of any kind or nature whatsoever, whether known or unknown, fixed or contingent, whenever arising or accruing, other than the Assumed Liabilities (as such term is defined in this Section 1.3). (b) From and after the Closing Date, Purchaser shall assume and perform the Assumed Liabilities and shall hold Seller and Stockholder harmless therefrom. As used herein, the term "Assumed Liabilities" means only the following: (i) the Assigned Contracts set forth on Schedule 1.1(g) hereto; (ii) any trade or accounts payable of Seller accrued prior to the Closing Date; and (iii) the Assumed Warranty Obligations as such term is defined in Section 5.10 herein. (c) Notwithstanding the foregoing, except for Assumed Liabilities expressly and specifically set forth above, for purposes of amplification and not of limitation Purchaser shall not assume and shall have no obligation to pay or perform any of the following debts, liabilities or obligations of Seller: (i) any tax, fee or charge pertaining to the Assets accruing on or prior to the Closing Date, including but not limited to income, sales, use, transfer or other tax, whether imposed on Seller or Purchaser, accruing due to the transactions contemplated hereby; (ii) any contract, agreement, lease or commitment not specifically set forth on Schedule 1.1(g) hereto; (iii) any environmental liability; (iv) any debts, liabilities or obligations arising under any guarantee, bond, debt, loan or credit agreement, promissory note, mortgage, security agreement, pledge or other similar agreement or instrument; (v) any obligation or liability to indemnify any person or entity (including but not limited to any officer, director or stockholder) for any expense, loss, damage, judgment, fine, cost, amount paid in settlement, legal fees or otherwise, whether such indemnity is pursuant to any statute, charter document, bylaws, agreement or otherwise; (vi) any liability or obligation relating to any financial indebtedness of Seller; (vii) any debt, liability or obligation incurred by Seller under this Agreement, or any cost or expense incurred in connection herewith or the transactions contemplated hereby, including, but not limited to attorney's fees and broker's fees; or (viii) any other debt, liability or obligation of Seller or of the Business, fixed, contingent or otherwise, whenever accrued, whether or not arising in the ordinary course of business. Section 2. Purchase Price and Payment. -------------------------- Section 2.1 Purchase Price. In payment and consideration for the sale and transfer of the Assets by Seller to Purchaser, upon the terms and subject to the conditions set forth herein, Purchaser shall assume and thereafter perform the Assumed Liabilities of Seller set forth in Section 1.3(b) hereof and Purchaser shall pay to Seller as consideration (the "Consideration") the amounts set forth below. The Consideration shall be paid as follows: (i) (a) On the Closing Date, Seller shall receive $3,516,785.00 in cash (the "Cash Portion") subject to 2.1(i)(b) below, which shall be paid by certified or bank cashier's check or by wire transfer of immediately available funds to an account designated by Seller. (b) On the Closing Date, Purchaser, with the assistance of Seller, will deliver to Seller a Closing Date balance sheet (the "Estimated Closing Date Balance Sheet"), for the period ended on the Closing Date, prepared on a basis consistent with Seller's December 31, 1997 balance sheet (the "Balance Sheet"). The Cash Portion payable pursuant to Section 2.1(i)(a) shall be reduced by any debt reflected on the Estimated Closing Balance Sheet ("Debt") and any shortfall in Working Capital reflected on the Estimated Closing Balance Sheet. (ii) (a) On the Closing Date, Purchaser shall issue and deliver to Seller 586,131 shares (the "Issued Shares") of Common Stock, par value $ .01 per share, of Purchaser (the "Common Stock"), which will be valued for purposes of the Consideration at $5.70 per share; (b) On the Closing Date, Purchaser shall grant and deliver to Seller a fully assignable option to purchase 47,524 shares of Common Stock at an exercise price of $.01 per share, in the form attached hereto as Annex VIII. (iii) (a) On the Closing Date, Purchaser shall issue and deliver to Seller an interest bearing, unsecured, subordinated, convertible promissory note (the "First Note") in the principal amount of $2,876,206.00 (the "Initial Principal") substantially in the form attached hereto as Annex V. (b) Seller may not convert the First Note until after the final determination of the principal amount of the First Note (the "Amended Principal") determined in accordance with the NTM EBITDA calculation (discussed below). After the determination of the NTM EBITDA, the First Note shall be convertible into Common Shares of ITP which will be valued at the time of conversion at $5.70 per share. (c) The Initial Principal amount of the First Note will be subject to adjustment within ninety (90) days after February 28, 1999, upon presentation of financial statements accompanied by a report of Purchaser@s accountants establishing NEWCO's earnings before interest, taxes, depreciation and amortization for the period beginning March 1, 1998, and ending February 28, 1999 ("NTM EBITDA"). The Amended Principal amount of the First Note shall be determined as follows: (1) If the NTM EBITDA does not exceed $1,188,103.00 (the "LTM EBITDA"), the Amended Principal amount of the First Note will be the Initial Principal amount less $2,851,447.20 (derived by multiplying (LTM EBITDA)(8)(.3) and referred to herein as the "First Holdback"). (2) If the NTM EBITDA is equal to or greater than $1,485,128.80 (125% of LTM EBITDA), then the Amended Principal amount of the First Note shall be maintained in the amount of $2,876,206.00; (3) If the NTM EBITDA is between $1,188,103.00 and $1,485,128.80, then the Amended Principal amount of the First Note shall be an amount reduced by a percentage of the First Holdback such percentage being determined as follows: (A) by subtracting NTM EBITDA from $1,485,128.80; (B) by dividing the result in subparagraph (1) above by $297,025.80 (the difference between NTM EBITDA and LTM EBITDA); and (C) by multiplying the result of subparagraph (2) above by the First Holdback; For example, if the NTM EBITDA was determined to be $1,346,329.00 then the calculation would be as follows: (A) $1,485,128.80 - $1,346,329.00 = $138,799.00; (B) $138,799.00/$297,025.80 = $0.47; and (C) ($0.47)($2,851,447.20) = $1,340,180.20. In this example, the Amended Principal amount of the First Note would be $1,536,025.80 (Initial Principal less the result in subparagraph (C) above). (d) If the Amended Principal amount of the First Note is less than the Initial Principal amount, then Seller shall transfer the First Note to Purchaser for cancellation and Purchaser shall issue and deliver to Seller an amended and restated First Note (the "Amended First Note"), reflecting the Amended Principal amount. Within seven (7) days after the issuance of the Amended First Note, Seller shall pay to Purchaser in cash or in Common Stock the amount representing the excess interest payment paid to Seller on the First Note or by further reducing the principal amount of the Amended First Note. (iv) On the Closing Date, the Purchaser shall execute and deliver an interest bearing, unsecured tax promissory Note in the principal amount of $500,000.00 (the "Tax Note") substantially in the form attached hereto as Annex VI; (v) On the Closing Date, Purchaser shall assume the Assumed Liabilities as defined herein; and Section 2.2 Post-Closing Adjustments to Consideration. - ----------------------------------------- (a) As promptly as practicable, and in any event not more than ninety (90) days following the Closing Date, Purchaser, together with its accountants, shall prepare and deliver to Seller's accountants a proposed final closing balance sheet (the "Proposed Final Closing Balance Sheet") for the period ended on the Closing Date, prepared on a basis consistent with the Purchaser's 1997 balance sheet. The Proposed Final Closing Balance Sheet shall be accompanied by a report of Purchaser's accountants. The Seller and Seller's accountants shall have the right to consult during reasonable business hours with appropriate personnel of Purchaser and Purchaser's accountants and have access to, and review and make copies of, the work papers of Purchaser and Purchaser's accountants with respect to the preparation of the Proposed Final Closing Balance Sheet. (b) (i) The Seller may dispute the Proposed Final Closing Balance Sheet prepared by Purchaser and Purchaser's accountants by notice to Purchaser setting forth in reasonable detail the amounts in dispute and the basis for such dispute within forty-five (45) days of its receipt of the Proposed Final Closing Balance Sheet. If the Seller fails to deliver a notice of objections within such 45-day period, the Seller shall be deemed to have accepted the Proposed Final Closing Balance Sheet which shall then constitute the final Closing Balance Sheet (the "Final Closing Balance Sheet"). (ii) If the amount of Debt or the balance in the Working Capital on the Proposed Final Closing Balance is in dispute, Purchaser's accountants and the Seller's accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within fifteen (15) days of the date of receipt by Purchaser of a written notice of dispute, Purchaser and the Seller shall, within five (5) additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within thirty (30) days of such submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by Purchaser in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. are in Seller's favor, and any of the remaining amount shall be borne by Seller. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver a Final Closing Balance Sheet and a certification of the conclusions thereon. (iii) If the amount of cash in Working Capital on the Final Closing Balance Sheet is less than $140,000.00, or if there is any Debt, then Seller shall pay to Purchaser, in cash, the difference between such amount and $140,000.00, plus the Debt amount within seven (7) days after receiving a copy of the Final Closing Balance Sheet. Section 2.3 Additional Consideration. Within ninety (90) days after February 28,1999 upon presentation of financial statements accompanied by a report of Purchaser's accountants demonstrating that NEWCO's NTM EBITDA exceeds $1,485,128.80, the Seller shall receive additional consideration (the "Additional Consideration"). The amount of Additional Consideration shall be eight (8) times the amount by which the NTM EBITDA exceeds $1,485,128.80. Purchaser shall pay to Seller any Additional Consideration as follows: (i) Within ninety (90) days after February 28, 1999, Seller shall receive thirty seven percent (37%) of the Additional Consideration in cash (the "Additional Cash Portion"); (ii) Within ninety (90) days after February 28, 1999, Seller shall receive thirty eight percent (38%) of any Additional Consideration in Issued Shares of Common Stock of Purchaser (the "Additional Common Stock"), which will be valued for purposes of the Additional Consideration at its current fair market value determined in a manner consistent with Purchaser's common practices and taking into consideration the value of the common shares of Purchaser issued pursuant to Purchaser's most recent acquisition occurring prior to the time of such issuance (the "Additional Common Stock Market Value"); (iii) Within ninety (90) days after February 28, 1999, Purchaser shall issue and deliver to Seller an interest bearing, unsecured, subordinated, convertible promissory note (the "Second Note") in the principal amount equal to twenty-five percent (25%) of the Additional Consideration (the "Second Note Initial Principal"). (a) Seller shall not convert the Second Note until after the final determination of the principal amount of the Second Note (the "Second Note Amended Principal") determined in accordance with the FTM EBITDA calculation (discussed below). After the determination of the FTM EBITDA, the Second Note will be convertible into Common Shares of Purchaser which will be valued at the time of conversion at the Additional Common Stock Market Value. (b) The Second Note Initial Principal amount will be subject to adjustment within ninety (90) days after February 29, 2000, upon presentation of financial statements accompanied by a report of Purchaser's accountants establishing NEWCO's earnings before interest, taxes, depreciation and amortization for the period beginning March 1, 1999, and ending February 29, 2000 (the "Following Twelve Month's or (FTM) EBITDA"). The Second Note Amended Principal amount shall be determined as follows: (1) If the FTM EBITDA does not exceed the NTM EBITDA, then the Second Note Amended Principal amount will be $0.00 and the Seller shall return the Second Note to Purchaser for cancellation. (2) If the FTM EBITDA is equal to or greater than 125% of NTM EBITDA, then the Second Note Amended Principal will be maintained at the amount of the Second Note Initial Principal; (3) If the FTM EBITDA is between 100% and 125% of the NTM EBITDA, then the principal amount of the Second Note shall be reduced by a percentage of the Second Note Initial Principal (the "Second Holdback") determined as follows: (A) by subtracting the amount of the FTM EBITDA from 125% of the NTM EBITDA; (B) by dividing the result of subparagraph (A) above by the difference between FTM EBITDA and NTM EBITDA; and (C) by multiplying the result of subparagraph (B) above by the Second Note Initial Principal. (D) by subtracting the result of subparagraph (C) above from the Second Note Initial Principal. (c) If the Second Note Amended Principal is less than the Second Note Initial Principal amount, then Seller shall transfer the Second Note to Purchaser for cancellation and Purchaser shall issue and deliver to Seller an amended and restated Second Note (the "Amended Second Note"), reflecting the Second Note Amended Principal amount. Within seven (7) days after the issuance of the Amended Second Note, Seller shall pay to Purchaser in cash or in Common Stock the amount representing the excess interest payment paid to Seller on the Second Note or by further reducing the principal amount of the Amended Second Note. Section 2.4 NTM/FTM EBITDA Calculation Determination. The Seller may dispute - ---------------------------------- the NTM EBITDA or the FTM EBITDA calculation set forth in the financial statements prepared by Purchaser and Purchaser's accountants by notice to Purchaser setting forth in reasonable detail the amounts in dispute and the basis for such dispute within forty-five (45) days of its receipt of such financial statements. If the Seller fails to deliver a notice of objections within such respective 45-day period, the Seller shall be deemed to have accepted the NTM EBITDA or FTM EBITDA. If the NTM EBITDA or FTM EBITDA amount is in dispute, Purchaser's and Seller's accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within fifteen (15) days of the date of receipt by Purchaser of a written notice of dispute, Purchaser and the Seller shall, within five (5) additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within thirty (30) days of such submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by Purchaser in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. are in Seller's favor, and any of the remaining amount shall be borne by Seller. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver financial statements for the period beginning March 1, 1998 and ending February 28, 1999, or beginning March 1, 1999 and ending February 29, 2000, as the case may be, and a certification of the NTM EBITDA or FTM EBITDA set forth therein. Section 2.5 Issued Shares. The Issued Shares shall be issued by Purchaser in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and applicable state securities laws and shall constitute "restricted securities" as such term is defined in Section 144 promulgated under the Securities Act. Section 2.6 Interest on First and Second Note. The First Note and the Second Note, if any, shall bear interest, respectively, on the unpaid principal balance at a fixed rate per annum equal to 8.0% in the amounts and pursuant to the terms specified in the respective Note. The First and Second Note will be payable in full in five (5) years from the time of issuance, with interest paid quarterly to Seller. Section 2.7 Tax Note. The Tax Note shall be payable in full in two years and Shall bear interest on the unpaid principal amount at a fixed rate per annum equal to ten percent (10%) in the amount and pursuant to the terms specified on Annex VI attached hereto. The Tax Note will not be convertible into Common Shares of Purchaser. Interest and principal on the Tax Note will be paid yearly. Section 2.8 Allocation of Purchase Price. The Consideration set forth in Section 2.1, and any Additional Consideration paid in accordance with Section 2.3 hereof shall be allocated among the Assets for all purposes (including financial reporting and tax purposes) as set forth in this Section 2.8. Seller and Purchaser each hereby covenants and agrees that it will not take a position on any income tax return, before any governmental agency charged with the collection of any income tax, or in any judicial proceeding that is in any way inconsistent with the allocation set forth herein. Section 3. Representations and Warranties of Seller and STOCKHOLDER. -------------------------------------------------------- Seller and STOCKHOLDER hereby jointly and severally represents and warrants to and for the benefit of Purchaser as follows: Section 3.1 Organization. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Utah. Seller is duly qualified or licensed to do business and is in good standing as a foreign corporation in each state and other jurisdiction in which the ownership, lease or operation of the assets and properties or the conduct of its business requires such qualification or licensing, as set forth on Schedule 3. l hereto, except where the failure to be so qualified would not have a material adverse effect upon the Seller or the Business. Except for the jurisdictions in which Seller is incorporated or is qualified or licensed as a foreign corporation, (i) no other jurisdiction has claimed, orally or in writing, that Seller is required to be licensed or qualified as a foreign corporation therein, (ii) Seller has never filed any franchise, income or other tax return in any other jurisdiction, based upon the ownership, lease or operation of property or assets therein or the derivation of income therefrom, and (iii) Seller does not own, lease or operate any property in any other jurisdiction, and the Assets are not located in any other jurisdiction. Section 3.2 Subsidiaries. Seller has no direct or indirect subsidiaries and does not own, hold or control, directly or indirectly, any shares of capital stock or any equity, ownership, management or voting interest in any corporation, general or limited partnership, limited liability company, joint venture, business trust or other business entity or association except as set forth on Schedule 3.2. Section 3.3 Power and Authority. Seller has all requisite right, power and authority, corporate or otherwise, to conduct its business and affairs (including the Business) as presently conducted and as proposed to be conducted, to own, lease and operate its assets and properties (including the Assets), and to execute, deliver and perform its obligations under, this Agreement and the other agreements and instruments to be executed and delivered by Seller hereunder (the "Related Seller Agreements"). The execution and delivery by Seller of this Agreement and the Related Seller Agreements and the performance by Seller of its obligations hereunder and thereunder have been duly and validly authorized by all requisite action, corporate or otherwise, of Seller. Section 3.4 Enforceability. This Agreement and the Related Seller Agreements Have been, or at Closing will have been duly and validly executed and delivered on behalf of Seller and constitute or will constitute legal, valid and binding obligations of Seller, enforceable against Seller in accordance with their respective terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium and other similar laws now or hereafter in effect relating to or affecting creditors' rights and remedies generally, and by general principles of equity, whether applied by a court of law or in equity. Section 3.5 No Conflicts. The execution and delivery by Seller of this Agreement and the Related Seller Agreements and the performance by Seller of the transactions and obligations contemplated hereby and thereby do not and will not, directly or indirectly, (a) violate, conflict with, or constitute a breach of or a default (or an event that, after the giving of notice or the lapse or time or both, would constitute a default) under, any provision of (i) its articles of incorporation, bylaws or other charter or organizational documents, (ii) any agreement among its shareholders or between Seller and its shareholders, (iii) any contract, obligation, note, security agreement, mortgage, bond, indenture, lease, loan agreement, debt instrument or other instrument, commitment or agreement to which Seller is a party or by which Seller or any of its assets (including the Assets) is or may be bound, or (iv) any license, franchise, approval, certificate, permit or authorization held by Seller or applicable to its assets (including the Assets), which violation, conflict, breach or default would have a material adverse effect upon the Seller or the Business; (b) violate any applicable federal, state, local or foreign law, statute, rule, regulation or ordinance, or any order, injunction, writ, judgment, decree or ruling of any court, arbitrator or governmental, quasi-governmental, administrative or regulatory body, agency or authority ("Governmental Authority"), which violation would have a material adverse effect upon the Company or the Business; (c) result in the creation or imposition of any mortgage, lien, pledge, security interest, conditional sales rights under any applicable bulk sales or bulk transfer law or other title retention agreement, or any other restriction, encumbrance or claim of any kind or description on or against any of Sellers' assets (including the Assets); or (d) constitute an event which would permit any individual, Entity or Governmental Authority (collectively, "Person") to terminate or modify any agreement, instrument or commitment or to accelerate the maturity of any debt, liability or obligation of Seller. Section 3.6 Defaults. It is not presently in material breach or violation of or material default under or conflict with any item set forth in Section 3.5(a) or (b); and no event or condition has occurred which, after the giving of notice or the lapse of time or both, could be reasonably expected to result in any such material breach, violation, default or conflict. Section 3.7 Consents. Except as set forth on Schedule 3.7, no consent, authorization, permit or approval of, notice or report to, or filing or registration with, or waiver (collectively, "Consents") by, any Person is necessary for Seller to execute and deliver this Agreement and the Related Seller Agreements and to perform its obligations hereunder and thereunder. Prior to the Closing Date, Seller shall obtain all Consents listed on Schedule 3.7 unless failure to obtain such would not have a material adverse effect on the Seller or the Business. Section 3.8 Litigation. There are no actions, suits, claims, investigations, arbitrations, hearings or other proceedings (whether civil, criminal, administrative, investigative or informal) (collectively, "Proceedings") pending or, to Seller's best knowledge, threatened by, before or involving any court, arbitrator or Governmental Authority (i) against or affecting Seller, the Business or the Assets, (ii) in which any Person has sought or is reasonably likely to seek to restrain or prohibit, or to obtain damages or other relief in connection with, this Agreement or the Related Seller Agreements or the transactions contemplated hereby or thereby, (iii) which, if determined adversely to Seller, would be reasonably likely to have a material adverse effect on Seller, the Business or the Assets or Seller's ability to perform its obligations hereunder or to consummate the transactions contemplated hereby, or (iv) involving in whole or in part the issue of criminal liability by Seller or any of its officers, directors, employees or agents, or pertaining to the Assets or the Business. Neither Seller nor any of the Assets are subject to any outstanding judgment, order, writ, injunction or governmental or regulatory order or authority. Seller is not presently engaged in any legal action to recover moneys due from damages caused by or to enforce its rights against any third party. Section 3.9 Ability to Dispose of the Assets. Seller is the sole legal owner of the Assets and has the sole dispositive power with respect to the Assets. Section 3.10 Brokers' Fees. Except as set forth on Schedule 3.10, no broker, finder, investment broker or similar agent is or shall be entitled to receive any fee, commission or other remuneration or compensation relating to the transactions contemplated by this Agreement based on any action taken by or on behalf of Seller. Section 3.11 Capitalization. The authorized capital stock of Seller consists of 50,000 shares of common stock, par value $1.00 per share, of which 1,000 shares are issued and outstanding all of which are owned beneficially and of record by STOCKHOLDER. Section 3.12 Dividends. Seller has no liability or indebtedness for dividends or other distributions declared or accumulated but unpaid with respect to any of its outstanding capital stock. Since December 31, 1997, Seller has not declared or paid any dividends or other distributions to its shareholders. Section 3.13 Corporate Documents. Seller has furnished to Purchaser true and complete copies or originals, as the case may be, of the following documents: (i) the articles of incorporation and bylaws of Seller; (ii) the minute books of Seller containing all records required to be set forth of all proceedings, consents, actions and meetings of the shareholders and board of directors (and all committees thereof) of Seller; and (iii) the stock transfer books of Seller setting forth all issuances and transfers of capital stock of Seller. Section 3.14 Financial Statements. Seller has furnished (or, with respect to the 1997 financial statement prior to the Closing will forward,) to Purchaser true and complete copies of Seller's audited balance sheets as of December 31, 1996 and 1997, and the related statements of operations and cash flows for the fiscal years then ended (together with the report thereon of an independent certified public accountants, as to the 1997 financial statements and to the 1996 financial statements, and in each case together with the notes thereto). All such Financial Statements (together with all related schedules and notes) (i) present fairly the financial condition, results of operations and cash flows of Seller as of the respective dates thereof and for the respective periods covered thereby; (ii) have been prepared in accordance with generally accepted accounting principles consistently applied throughout the periods indicated and with prior periods (except for changes specifically noted therein); (iii) have been prepared in accordance and consistent with the books and records of Seller which have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls; and (iv) reflect reserves which are reasonably adequate for all known or reasonably contemplated liabilities or obligations of any nature, whether accrued, absolute, fixed, contingent or otherwise and whether due or to become due, and all reasonably anticipated losses. Section 3.15 Absence of Undisclosed Liabilities. As of the date hereof, except as set forth in the balance sheet of Seller as of December 31, 1997 and the related notes thereto ("1997 Balance Sheet"), Seller does not have any debt, liability, guarantee, demand or obligation of any kind or nature whatsoever, whether known or unknown, whether accrued, absolute, contingent or otherwise, and whether due or to become due, except for those that (i) are not required by generally accepted accounting principles to be included in the 1997 Balance Sheet, and (ii) have been incurred after the date of the 1997 Balance Sheet in the ordinary course of business and are usual and normal in amount, both individually and in the aggregate. To the best of Seller's knowledge, there has been no circumstance, condition, event or arrangement that could be reasonably expected to give rise to any additional debts, liabilities or obligations of Seller. Section 3.16 No Material Adverse Change. (a) Since December 31, 1997, (i) the business of Seller has been conducted only in its historic, ordinary course, (ii) there has been no material adverse change in the Assets, liabilities, Business, operations, affairs, condition (financial or otherwise) or prospects of Seller; and (iii) there has been no damage, destruction, loss, occurrence or event (whether or not insured against) which, either singly or in the aggregate, has had, or might reasonably be expected to have, a material adverse effect on the Assets, liabilities, Business, operations, affairs, condition or prospects (financial or otherwise) of Seller. (b) Without limiting the generality of the foregoing, since December 31, 1997, there has not been any: (i) Sale, assignment, transfer, lease or other disposition of any Assets, except of inventory and equipment to customers in the ordinary course of business for fair consideration; (ii) Mortgage, pledge, lien, claim or other encumbrance, created or imposed on or against any Asset; (iii) Capital expenditure (or series of related capital expenditures) by Seller exceeding $25,000.00; (iv) Material destruction, damage to or loss (whether or not insured against) of any Assets; (v) Labor trouble, dispute, strike, work stoppage, or other event or condition of any character, actual or threatened; (vi) Declaration, setting aside, or payment of any dividend or other distribution in respect of the capital stock of Seller, or any direct or indirect redemption, purchase, or other acquisition by Seller of any of its shares of capital stock; (vii) Entering into any agreement, contract, lease or license (or series of related instruments), either involving more than $25,000.00, or outside the ordinary course of business; (viii) Modification, amendment, cancellation or termination of any contract, agreement, lease or license to which Seller is a party, except in the ordinary course of business; (ix) Commencement or notice or threat of commencement of any Proceeding against or affecting Seller, the Business or the Assets; (x) Incurrence of indebtedness for borrowed money or increase in the long-term indebtedness of Seller; (xi) Amendment to Seller's articles of incorporation or bylaws; (xii) Capital investment in, loan to or acquisition of the securities or assets, or any other Person (other than in the ordinary course of business); (xiii) Grant of any license or sublicense of any Assets or any rights under or with respect to any Intellectual Property; (xiv) Any transaction between Seller and any of its officers, directors or employees, or involving any of the Assets and involving any officers, directors or employees of Seller; (xv) Waiver, cancellation, compromise or release of any material right or claim of Seller, or forgiveness or cancellation of any material debt or claim; (xvi) Loan by Seller to any Person, or guaranty by Seller of any loan, debt or other obligation of any other Person; (xvii) Increase in the salary, benefits or other compensation payable or to become payable by Seller to any of its officers, directors, employees or consultants other than normal merit increases, or the declaration, payment, or commitment or obligation of any kind for the payment by Seller of a bonus or other additional salary or compensation to any such person; (xviii) Agreement, contract, plan, policy or arrangement binding upon Seller either created or modified as to severance or termination benefits of any employee, officer, director or agent; (xix) Failure to maintain levels of inventory proportionate to Seller's existing business, or alteration of the inventory practices maintained by Seller during the previous twelve months; (xx) Other events or conditions of any character that, individually or in the aggregate, (A) have or might reasonably have a material adverse effect on the Assets, Business, operations, financial condition, liabilities or prospects of Seller, or (B) cause or might reasonably be expected to cause Seller to be in breach of any of its representations, warranties or covenants hereunder; or (xxi) Any agreement, commitment, arrangement or understanding by Seller to do any of the actions described in the preceding clauses (i) through (xvi). Section 3.17 Taxes. (a) Within the times (or if later all penalties and interest related thereto having been paid in full) and in the manner prescribed, Seller has accurately prepared in good faith and properly filed all federal, state, local and foreign tax returns, reports and forms required by law, rule, regulation or otherwise to be filed and has paid all taxes, assessments and penalties due and payable, and Seller has furnished to Purchaser true and complete copies of all such tax returns, reports and forms so filed since December 31, 1994. All tax returns, reports and forms filed by Seller accurately set forth all items (to the extent required to be included or reflected in such returns) relevant to its future tax liabilities, including the tax bases of the Assets. Seller has fully paid or has made adequate provision in the 1997 Balance Sheet for all federal, state, local and foreign taxes for the period ending on the date of the 1997 Balance Sheet. Seller has timely collected, withheld and paid over all taxes required to be withheld by any federal, state, local or foreign taxing authority and complied with all information reporting requirements related thereto. (b) There are no disputes pending or overtly threatened by any taxing authority as to taxes of any nature payable by Seller. No examinations or audits of the federal, state, local or foreign tax returns of Seller are currently in progress or, to the best knowledge of Seller, threatened or proposed. No deficiency or adjustment for any tax has been claimed, proposed or assessed against Seller by any taxing authority. Seller has not waived or extended any applicable statute of limitations relating to the assessment of federal, state, local or foreign taxes. Seller is not a party to any tax indemnity, tax sharing, or tax allocation agreement. There are no tax liens upon any property or assets of Seller except for taxes not yet due and payable. (c) Seller has not filed and will not file any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f) of the Code apply to any disposition of subsection (f) assets (as such term is defined in Section 341(f)(4) of the Code) owned by Seller. The acquisition of the Assets by Purchaser will not result in the payment of any "excess parachute payment" within the meaning of Section 280G of the Code, and Seller is not a party to any agreement, plan or arrangement that could give rise to any payment that would not be deductible pursuant to Section 280G or Section 162 of the Code. No outstanding debt obligations of Seller are "corporate acquisition indebtedness" within the meaning of Section 279(b) of the Code. Seller is not a "United States real property holding company" as defined in Section 897(c)(2) of the Code. Seller has not filed an election under Section 338(g) or Section 338(h)(10) of the Code or caused or been the subject of a deemed election under Section 338(e) of the Code. Seller has not made any payments, and is not obligated to make any payment, and is not a party to any agreement, plan or arrangement that under any circumstances could obligate it to make any payments that will not be deductible under Section 162(m) of the Code. (d) As used in this Section 3.17, the term "tax" includes all federal, state, local or foreign income, franchise, profits, gross receipts, value added, net worth, real property, personal property, sales, transfer, use, service, ad valorem, stamp, environmental, windfall profits, employment, social security, Medicare, disability, workers' compensation, unemployment compensation, occupation severance, purchaser premiums, excise, withholding, payroll and other taxes, charges, fees, levies, tariffs, duties and other assessments of any kind or nature, imposed by the laws and regulations of any governmental jurisdiction (federal, state, local or foreign) or by any taxing authority (federal, state, local or foreign) and all interest, fines and penalties related thereto. Section 3.18 Title to and Condition of Assets. The Assets constitute all of the assets, rights and interests of every kind and description that are used by Seller in the Business or necessary for the Business and will permit Purchaser to operate the Business in compliance with all legal requirements substantially as conducted by Seller. All tangible Assets are physically located at 857 South Jordan Parkway, Suite 200, Salt Lake City, Utah 84095 and 6155 East Indian School Road, Suite 100A, Scottsdale, Arizona. Seller has and will transfer to Purchaser at Closing good, valid, marketable and exclusive title to and rightful and peaceful possession of all of the Assets, free and clear of any and all mortgages, liens, security interests, pledges, charges, encumbrances, equities, rights of first refusal, options to purchase, equitable interest, deeds of trust, claims, easements, rights-of-way, covenants, conditions or restrictions of any kind or nature whatsoever ("Liens"), except for (i) those disclosed in the 1997 Balance Sheet; (ii) liens for current taxes not yet due and payable; and (iii) liens disclosed on Schedule 3.18 hereto which will be removed and released at or prior to the Closing. Seller is in rightful possession of all premises and personal property leased to it from others. All tangible personal property of Seller is generally in good operating condition and repair (ordinary wear and tear excepted), has been utilized or serviced only in a manner that would not void or limit the coverage of any warranty thereon, has been properly maintained and are adequate and suitable for its intended purposes. Section 3.19 Real Property. Seller does not, directly or indirectly, own any Real property. Schedule 3.19 hereto contains a true and complete list of all leases and subleases pursuant to which Seller is the lessee or lessor of any real property, complete and accurate copies of which leases have been previously furnished to Purchaser. Seller has a valid leasehold in and enjoys peaceful and quiet possession of all property leased under such leases. Section 3.20 Personal Property Leases. Schedule 3.20 hereto sets forth each lease of ------------------ personal property under which Seller is either a lessee or lessor of certain of the Assets. Each such lease is in full force and effect and is a valid and binding obligation of Seller and of each of the parties thereto. Seller is not, and Seller does not have any knowledge that any other party is, in default with respect to any material term or condition of any such lease, and no event has occurred which through the passage of time or the giving of notice, or both, would constitute a material default thereunder or would cause the acceleration of any obligation of any party thereto or the creation of a lien or encumbrance upon any Asset. Section 3.21 Inventory. All of Seller's inventory of raw materials, work in process and finished goods, parts and supplies (including inventory on consignment) consists of items of a quantity and quality usable and saleable in the ordinary course of business by Seller (net of any reserve reflected in the 1997 Balance Sheet), except for obsolete, defective, damaged and slow-moving items and items below standard quality, all of which have been written down on the books of Seller to net realizable market value or have been provided for by adequate reserves in the 1997 Balance Sheet. All inventories of finished goods consist of items that have been manufactured in accordance with, and which meet, applicable industry standards. All inventories are correctly marked. The inventories shown on the 1997 Balance Sheet are based on quantities determined by physical count or measurement and are valued at the lesser of cost (determined on a first-in, first-out basis) or market value and on a basis consistent with that of prior years and are adjusted for excess and obsolescence in compliance with Seller's accounting policies which have been delivered in writing to Purchaser. Section 3.22 Intellectual Property. - --------------- (a) Schedule 3.22 sets forth a complete and accurate list and brief description of all patents, trademarks, logos, service marks, trade names, corporate names, fictitious names and copyrights, and each application therefor, which are either owned by Seller or which are used by Seller in the Business and, in each case where Seller is not the owner thereof, the name of the owner thereof. Except as set forth in Section 3.22, Seller is the exclusive owner of or possesses adequate and valid licenses and other rights to use all of the items set forth in Schedule 3.22 hereto and all trade secrets, licenses, inventions, processes, discoveries, developments, designs, formulas, know-how, drawings, customer and supplier lists, software, confidential information and other proprietary information and all other proprietary rights, intangible assets and intellectual property, and all copies and tangible embodiments thereof in whatever form or medium (collectively, "Intellectual Property") necessary for the operation of the Business as presently conducted and as proposed to be conducted. (b) All rights of Seller in and to its Intellectual Property will be transferred to Purchaser at the Closing. (c) Seller has taken all necessary and desirable action to maintain and protect each item of Intellectual Property that it owns or uses. To Seller's best knowledge, Seller has not interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of any third parties, and Seller has never received any charge, complaint, claim, demand or notice alleging any such interference, infringement, misappropriation or conflict (including any claim that Seller must license or refrain from using any Intellectual Property rights of any third party). To Seller's best knowledge, no third party has interfered with, infringed upon, misappropriated or otherwise come into conflict with any Intellectual Property rights of Seller. No claim, demand, assertion, action, suit, arbitration, hearing, investigation or proceeding is pending or, to the best knowledge of Seller, threatened, which pertains to or challenges the validity, ownership or enforceability of any right of Seller in respect to of Intellectual Property. To Seller's best knowledge, the continued operation of the Business as currently conducted will not interfere with, infringe upon, misappropriate or otherwise come into conflict with any Intellectual Property rights of any third parties. (d) Seller is not a party to any agreement, document, arrangement or understanding pursuant to which Seller has licensed or granted any right or interest in, to or under any of its Intellectual Property. Seller is not obligated or under any liability whatsoever to make any payment, by way of fees, royalties or otherwise, to any owner or licensor of, or other claimant to, any of the Intellectual Property. Seller has not disclosed any of its trade secrets or other proprietary or confidential information to any Person, except pursuant to a loan or other agreement obligating the recipient to maintain the confidentiality thereof. To the best of Seller's knowledge, no employee of Seller is subject to any agreement, arrangement or commitment with any former employer or other person, or is subject to any judgments, order, decree or ruling of any court, arbitrator or Governmental Authority regarding confidential information, or rights or restrictions on competition, that would otherwise affect such employee's ability to perform his duties to Seller. Seller has never agreed to indemnify any person for or against any interference, infringement, misappropriation or other conflict with respect to any item of its Intellectual Property. Section 3.23 Name. Seller has the exclusive right in perpetuity to use the name "Call Business Systems, Inc." in the State of Utah and Arizona and any derivations and variations thereof, for and in connection with the Business, and has not granted and will not grant to any other Entity the right to use, and will not after the Closing use, such name as either corporate names, trade names or fictitious names. Section 3.24 Relationships with Suppliers and Customers. Schedule 3.24 contains a complete and accurate list of (i) the names, addresses and dollar amounts of business of each of the 20 largest customers of the Seller, in terms of sales during 1997, and (ii) the name, address and dollar amounts of business of each of the Company's 10 largest suppliers during the 1997 fiscal year. Since December 31, 1997, no supplier or customer of Seller has canceled any contract or order or has indicated any intention to terminate or materially alter its existing business relationship with Seller, whether as a result of the transactions contemplated hereby or otherwise which cancellation or termination would have a material advance effect on the business of Seller. Seller is not involved, and Seller has no knowledge of any facts or circumstances which is reasonably expected could result, in any material claim, dispute or controversy, with any of its material suppliers or customers. Section 3.25 Labor and Employment Matters. - ----------------------- (a) Schedule 3.25(a) contains a true list of all persons employed full time by Seller as of March 31, 1998 or as of the Closing Date, whichever date is later. (b) Seller is not a party to any contract, collective bargaining agreement or other agreement with any labor union including any collective bargaining agreement. There has never been an actual or threatened labor dispute, strike, picket, work slowdown, work stoppage or any other job action at any business location of Seller. There is no unfair labor practice complaint against Seller pending before the National Labor Relations Board or any state or local agency, no pending or threatened labor strike or other material labor trouble affecting Seller, no material labor grievance pending or threatened against Seller, no pending representation question respecting the employees of Seller, no pending or threatened arbitration proceedings arising out of or under any collective bargaining agreement to which Seller is a party, and no basis for which a claim may be made under any collective bargaining agreement to which Seller is a party or under which Seller is alleged to be obligated. No union organizing attempts have been made or threatened. Seller has not received a demand for recognition from any labor union with respect to, and, to Seller's knowledge, no attempt has been made or is being made to organize, any of the persons employed by Seller. (c) Seller is in compliance in all material respects with all applicable laws, rules and regulations respecting the employment of, including but not limited to, fair employment practices, terms and conditions of employment, and wages and hours. Seller has not engaged in any unfair or illegal labor practice, and there are no charges or claims of employment discrimination or unfair labor practices pending, or, to the best knowledge of Seller after due inquiry, threatened against, Seller. (d) No proceedings or claims are pending or, to the best knowledge of Seller, threatened against Seller with respect to any violation or alleged violation of any applicable federal, state or local laws, rules and regulations relating to the employment of labor, including, without limitation, those related to wages and hours, collective bargaining, discrimination on any basis, including without limitation, on the basis of race, color, religion, sex, national origin or age, and Seller has complied in all material respects with all applicable laws and regulations relating to employment of labor. (e) Seller has made, or will have made, payment in full to all of its employees through the end of the payment period ending immediately prior to the Closing Date of all wages, salaries, commissions, bonuses, benefits and other compensation due to such employees or otherwise arising under any policy, practice, agreements, plan, program, statute or law. (f) Seller, STOCKHOLDER and their affiliates are in compliance with their obligations, if any, pursuant to the Workers Adjustment and Retraining Notification Act of 1988, as amended ("WARN"), and all other notification obligations arising under any federal, state or local, or foreign statute, rule or regulation. Section 3.26 Employee Benefit Plans. ----------------- (a) List of Plans. Except for the plans set forth on Schedule 3.26 hereto, Seller does not now nor has it ever established, maintained, sponsored or contributed to any "employee benefit plan. as such term is defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or any other welfare, bonus, deferred compensation, retirement, incentive, pension, profit sharing, stock purchase, stock option, stock appreciation right, severance, or other similar employee benefit plan, program, policy, arrangement or practice, whether formal or informal, written or oral (collectively, "Employee Plans"), covering any current or former employee, officer or director of Seller. (b) Claims. No Proceeding with respect to any Employee Plan (other than routine claims for benefits) is pending or, to the best knowledge of Seller, threatened, and the Company (and employees with responsibility for employee benefits matters) has no knowledge of any facts that it is reasonably expected could form the basis for any such action, suit, proceeding, hearing or investigation. (c) ERISA Liabilities. Neither Seller, nor any of the Employee Plans, nor any trust created thereunder, nor, to the knowledge of Seller, any fiduciary (as defined in Section 3(21) of ERISA) thereof, is or has been in violation of, or has incurred any liability, directly or indirectly, under any provision of ERISA or the Code or to its Pension Benefit Guaranty Corporation ("PBCC"), other than liability for premiums due to the PBCC which, to the extent they are due and payable, have been paid. (d) Severance Obligations. Seller has not entered into any severance or Similar arrangement in respect to any present or former employee that would result in the obligation, absolute or contingent, of the Purchaser to make any payment to any present or former employee following termination of employment. (e) Liabilities Due to Agreement. The consummation of the transactions contemplated hereby will not (i) modify or accelerate any benefits or the vesting of benefits under any Employee Plan or constitute an event entitling any Person to any additional or other benefits, or (ii) result in any liability to Purchaser for taxes, penalties, interests or other claims resulting from any Employee Plan. Section 3.27 Insurance. Schedule 3.27 hereto sets forth a complete and accurate list of all of the insurance policies (showing the insurer, types of coverage, policy expiration dates, policy numbers, deductibles and policy limits as to each such policy) currently in force under which the Assets are insured or which provide for bonding and surety arrangements in connection with the Business. All such policies are in full force and effect and have been issued under valid policies for the benefit of Seller by properly licensed insurance companies. The premiums on such policies have been paid as they became due and payable, and Seller is not in default with respect to payment of premiums on any such policy. All of the Assets of a type customarily insured are covered by effective insurance in amounts at least equal to their fair market value, and such insurance provides protection against losses and risks that are customarily insured against by comparable businesses. Section 3.28 Contracts. Except as set forth on Schedule 3.28, each lease, contract, agreement, license, understanding, indenture, mortgage, deed of trust, sales order, obligation and commitment ("Contract") to which Seller is a party, or by which it or any of the Assets are bound, (i) is in full force and effect and is a valid and binding obligation of Seller and of the other parties thereto, enforceable by Seller in accordance with its terms, and (ii) if an Assigned Contract, may be transferred by Seller to Purchaser without penalty and will be enforceable by Purchaser. Neither Seller nor, to the best knowledge of Seller, any other party to such Contract is in any material respect in breach of or in default under any Contract, nor has any event or circumstance occurred which, with notice or lapse of time or both, would constitute a material breach or default of the Contract. Seller has not received notice and has no reason to believe that any party to any Contract intends to cancel or terminate any Assigned Contract or to exercise or not exercise any option thereunder. (b) Schedule 3.28 hereto sets forth a complete and accurate list of each of the following Contracts to which Seller is a party or by which the Assets are bound: (i) any distributor's or manufacturer's representative or agency agreement; (ii) any output or requirements agreements; (iii) any agreement not entered into in the ordinary course of business; (iv) any indenture, mortgage, deed of trust, lease or any agreement that is unusual in nature, duration, or amount (including, without limitation, any agreement requiring the performance by the Seller of any obligation for a period of time extending beyond one year from the Closing Date involving total consideration of more than $10,000.00); (v) any contract with any Government Authority, (vi) any Contract that is materially adverse to the business, properties, assets, liabilities, financial condition or results of operations of Seller; (vii) any Contract for the lease of personal property to or from any Person; (viii) any Contract for the purchase or sale of raw materials, commodities, supplies, products or other personal property, or for the furnishing or receipt of services, the performance of which would extend over a period of more than one (1) year or that involves consideration in excess of $10,000.00; (ix) any Contract concerning a partnership or joint venture; (x) any Contract under which it has created, incurred, assumed, guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, or under which it has imposed a lien on any of the assets; (xi) any Contract concerning confidentiality or non-competition; (xii) any Contract involving any director, officer, stockholder or other affiliate of Seller; (xiii) any Contract for the employment of any individual on a full-time, part-time, consulting, independent contractor or other basis or providing severance benefits; (xiv) any profit sharing, deferred compensation, severance, termination or other plan or arrangement for the benefit of current or former directors, officers, or employees; (xv) any Contract under which it has advanced or loaned any amount to any of its directors, officers or employees; or (xvi) any Contract material to the Assets or the Business. Section 3.29 Licenses. All licenses, rights, privileges, franchises, permits, approvals, consents and other authorizations related to the Assets reasonably necessary for the lawful conduct of the Business as it is presently conducted and reasonably necessary to own, operate, maintain and use the Assets in the manner in which they are now being operated, maintained and used, including all applicable zoning, environmental, health, safety and other permits, have been timely obtained and are currently in effect, and Seller has not violated, and is not in violation of, any such licenses, rights, privileges, permits, franchises, consents or other authorizations. Section 3.30 Product Liability Claims. No Proceeding is pending or, to the best knowledge of Seller, threatened against or affecting Seller, arising out of any injury to individuals or to property as a result of the ownership, possession or use of any product manufactured, sold, leased or delivered by Seller, and Seller knows of no facts, circumstances, actions or omission that could reasonably create the basis for any such Proceeding. Section 3.31 Product Warranties. Schedule 3.31 sets forth a complete and Accurate description of all warranties and pending warranty and service obligations of Seller to its customers with respect to the products manufactured or sold by Seller within the two year period prior to the date of this Agreement, including the beginning and ending dates of such warranty obligations, and a summary of the warranty charges incurred by Seller during 1996, 1997 and to date in 1998. Schedule 3.31 also contains a copy of all such written warranties, and a list and amount of all products manufactured or sold by Seller. Each product manufactured, sold, leased or delivered by Seller to any of its customers has been in conformity with all applicable contractual commitments and all express and implied warranties. Seller has no current liability, and knows of no reasonable basis for any present or future Proceeding against it giving rise to any liability, for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the 1997 Balance Sheet. There is no pending or, to the best knowledge of Seller, threatened Proceeding under such warranties. Section 3.32 Compliance with Laws. Seller, the Business and the Assets are and have been in material compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, rules, regulations, codes, licenses, permits, orders, judgments, decrees and other legal requirements (including, without limitation, those applicable to building, health, employment, labor, product liability, zoning, occupational safety, conservation, unfair competition, labor practices or corrupt practices) which affect or are applicable to the Assets and the Business. Section 3.33 Environmental Laws. --------------- (a) Seller is, and at all times has been, in compliance in all material respects with all federal, state, local and foreign laws (whether common or statutory), statutes, codes, rules, regulations, orders, injunctions, decrees, judgments, compacts, treaties, conventions, legal doctrines, plans, demand letters, agreements with any governmental or regulatory authorities and all other requirements relating to pollution or the protection of health, safety or the environment ("Environmental Laws"), including without limitation the release, discharge or emission of any Hazardous Substances (as defined below) into the environment (including, without limitation ambient air, surface water, ground water, land surface, or subsurface strata) and the manufacture, generation, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances, resulting from the operation of the Business or the ownership, lease or use of the Assets, or relating to any real estate currently or previously owned but leased by Seller. (b) Seller has not received any notices, demand letters, citations, summons, complaints or requests for information from, and no action, suit, hearing, investigation, order or other proceeding is pending or, to the best knowledge of Seller, threatened by or before any court, Governmental Authority or other Person regarding any actual or threatened violation of or liability under any Environmental Law. (c) Seller is not subject to any judicial, executive, legislative, regulatory or administrative ruling, order or decree arising under or relating to any Environmental Law. (d) Seller has timely obtained, currently holds and is in compliance in all material respects with the provisions of all permits, licenses, certificates, consents and other authorizations and approvals required in connection with the operation of its business and the ownership, leasing or use of its assets and properties under all Environmental Laws. (e) Seller is not aware of any event, condition, circumstance, activity, practice, action or plan which is reasonably likely to (i) prevent continued compliance with the foregoing, (ii) give rise to any liability under any Environmental Law, including but not limited to liability based on or resulting from Seller's manufacturing, processing, distribution, use, treatment, storage, disposal, transport or handling, or the emission, discharge or release into the environment of any Hazardous Substance, (iii) give rise to any liability for remedial actions (including removal, clean-up, response and monitoring), or (iv) otherwise have a material adverse effect on Seller or cause Seller to incur substantial costs. No Hazardous Substance has been used, stored, placed, treated, transported, manufactured, generated, processed, deposited, distributed, handled, released, deposited, spilled, discharged or disposed of on or under any property currently or previously owned or leased by Seller except for common household and office products in de-minimis quantities. (f) There is no above-ground or underground storage tank located on or under, or to Seller's best knowledge any asbestos located on, any real property or structure owned or leased by Seller. (g) As used herein, the term "Hazardous Substance" means (i) any substance or material heretofore or hereafter designated as "hazardous" or "toxic" under the Resource Conservation and Recovery Act, 42 U.S.C. Section 9601 et seq., the Federal Water Pollution Control - -- -- Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the Comprehensive Environmental Response Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et seq., or the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et seq., all as amended and in the regulations promulgated thereunder pursuant thereto; (ii) any "solid waste," "hazardous waste," "contaminant," "pollutant" or "infectious waste," as such terms are defined in any other Environmental Law at any time; (iii) asbestos, urea- formaldehyde, polychlorinated biphenyls ("PCBs"), methylene chloride, trichlorethylene, 1,2-transdichloreoethyline, dioxins, dibenzofurans, nuclear fuel or material, chemical waste, radioactive material, explosives, known carcinogens, petroleum products and byproducts, and other dangerous, toxic or hazardous pollutants, contaminants, chemicals, materials or substances listed or identified in, or regulated by, any Environmental Law; (iv) any substances listed in the United States Department of Transportation Table (49 C.F.R. 172.17d.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) as hazardous substances (40 C.F.R. Part 302 and amendments thereto); and (v) any additional substances, materials and wastes which at any time become classified or considered to be hazardous or toxic under any Environmental Law. Section 3.34 No Loss of Rights or Legal Obstacles. The execution and delivery of this Agreement and the Related Seller Agreements by Seller and its performance of the transactions and its obligations contemplated hereby and thereby do not and will not: (a) result in any loss of any material legal right of Seller being transferred to Purchaser; (b) result in any termination, modification or cancellation of any Assigned Contract; (c) result in the termination, modification, or cancellation of, give rise to any right of termination, modification, or cancellation with respect to, give rise to the acceleration of any performance required under, result in any increase in any payment due or other liability under, change the performance required under, or otherwise adversely affect any material contract, or modify any material contract, or result in, or require, the creation or imposition of any material lien, charge, or encumbrance upon the Assets, or result in the termination or impairment of any material permit, license, franchise, or authorization pertaining to the Assets; or (d) to the best of Seller's knowledge, adversely affect the Assets or the Business in any material respect. Section 3.35 Bank Debt. Schedule 3.35 hereto sets forth a complete and accurate list of all loans and credit agreements, line of credit, promissory notes, loan agreements and other arrangements between Seller and any bank, financial institution, lender or creditor of any sort. Section 3.36 Transactions with Shareholders and Employees. Seller has no outstanding loans or other advances to, and is not a party to any lease, license or other agreement, understanding or arrangement with, any shareholder, officer, director or employee of Seller, other than out-of-pocket expenses incurred in the ordinary course of business. No shareholder, officer, director or employee of Seller owns or has any interest in any of the Assets. Section 3.37 Absence of Certain Commercial Practices. To the best of Seller's knowledge, neither Seller nor any officer, director, employee or agent of Seller (or any Person acting on behalf of any of the foregoing), has directly or indirectly (i) given or agreed to give any gift or similar benefit of more than nominal value on behalf of Seller to any customer, supplier, employee or official of any Governmental Authority (domestic or foreign), to induce the recipient or his employer to do business, grant favorable treatment or compromise or forego any claim, (ii) made any significant payment which might be improper under prevailing law (regardless of the jurisdiction in which such payment was made) to promote or retain sales or to help, procure or maintain good relations with suppliers, (iii) engaged in any activity which constitutes a violation of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations promulgated thereunder, (iv) engaged in any practice violating any law prohibiting compliance with an unsanctioned foreign boycott, (v) established or maintained any unrecorded or illegal corporate fund or account or assets, (vi) made false or fictitious entries on the books or records of Seller, or (vii) failed to perform its obligations in any material respect under any Contract with, or violated in any material respect any federal law known to Seller in its dealings with, the Federal government or any agency or department thereof, including, but not limited to, any law with respect to conspiracy to defraud, false claims, conspiracy to defraud the United States, embezzlement or theft of public money, fraud and false statements, false demands against the United States, mail fraud, wire fraud, RICO, and truth in negotiations. To the best of Seller's knowledge, no such gift or benefit is required in connection with the operations of Seller or its business to avoid any fine, penalty, cost, expense or adverse change in the assets, properties, liabilities, financial condition, results of operations or business of Seller. Section 3.38 Non-Foreign Status. Seller is not a "non-resident alien", "foreign corporation", "foreign partnership", "foreign trust" or "foreign estate" within the meaning of the Internal Revenue Code of 1986, as amended, and the regulations thereunder. Section 3.39 Full Disclosure. No representation, warranty or other statement by Seller in this Agreement, or in any schedule, exhibit, certificate, financial statement or other instrument or document furnished or to be furnished to Purchaser, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary in order to make any of the statements contained herein or therein, when taken as a whole, not false or misleading in any material respect in light of the circumstances in which they were made. There is no fact or circumstance known to Seller that materially adversely affects, or in the future may be reasonably expected to (insofar as Seller can now reasonably foresee) materially adversely affect, the Assets or the properties, liabilities, business, affairs, operations, condition (financial or otherwise) or prospects of Seller that has not been set forth herein or otherwise described to Purchaser. Section 4. Representations and Warranties of Purchaser. Purchaser hereby represents and warrants to and for the benefit of Seller and STOCKHOLDER as follows: Section 4.1 Organization. Purchaser is a corporation duly organized, validly Existing and in good standing under the laws of the State of Delaware. Purchaser is duly qualified or licensed to do business and is in good standing as a foreign corporation in each state and other jurisdiction in which the ownership, lease or operation of the assets and properties or the conduct of its business requires such qualification or licensing, as set forth on Schedule 4. l hereto. Except for the jurisdictions in which Purchaser is incorporated or is qualified or licensed as a foreign corporation, (i) no other jurisdiction has claimed, orally or in writing, that Purchaser is required to be licensed or qualified as a foreign corporation therein, (ii) Purchaser has never filed any franchise, income or other tax return in any other jurisdiction, based upon the ownership, lease or operation of property or assets therein or the derivation of income therefrom, and (iii) Purchaser does not own, lease or operate any property in any other jurisdiction, and the Assets are not located in any other jurisdiction. Section 4.2 Power and Authority Purchaser has, or will as of the Closing Date have all requisite right, power and authority, corporate or otherwise, to conduct its business and affairs as presently conducted and as proposed to be conducted, to own, to lease and operate its assets and properties, and to execute all requisite right, power and authority, corporate or otherwise, to execute, deliver and perform its obligations under this Agreement and the other agreements and instruments to be executed and delivered by Purchaser hereunder (the "Related Purchaser Agreements"). The execution and delivery by Purchaser of this Agreement and the Related Purchaser Agreements and performance of Purchaser's obligations hereunder and thereunder has been, or as of the Closing Date will have been duly and validly authorized by all requisite action, corporate or otherwise, of Purchaser. Section 4.3 Enforceability. This Agreement and the Related Purchaser Agreements have been, or as of Closing will have been duly and validly executed and delivered on behalf of Purchaser and constitute, or will constitute as of the Closing Date the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, receivership, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and remedies generally, and by general principles of equity. Section 4.4 No Conflicts. The execution and delivery by Purchaser of this Agreement and the Related Purchaser Agreements and the performance by Purchaser of the transactions and obligations contemplated hereby and thereby do not and will not (a) violate, conflict with, contravene or constitute a breach or a default (or an event that, after the giving of notice or the lapse or time or both, would constitute a default) under any provision of (i) its certificate of incorporation, bylaws or other charter or organizational documents; (ii) any agreement among its shareholders or between Purchaser and its shareholders; (iii) any contract, agreement, obligation, understanding, commitment, note, security agreement, lease, loan agreement, debt instrument or other instrument or agreement to which Purchaser is a party or by which Purchaser or any of its assets is or may become bound; (iii) any license, approval, certificate, permit or authorization held by Purchaser; or (b) violate any applicable federal, state or local law, statute, rule, regulation or ordinance, or any order, injunction, writ, judgment, decree, or ruling of any court, arbitrator or Governmental Authority. Section 4.5 Consents. No Consent by any Person is necessary for Purchaser to Execute and deliver this Agreement and the Related Purchaser Agreements, and to perform its obligations hereunder and thereunder. Section 4.6 Litigation. There are no Proceedings pending or, to the best of Its knowledge, threatened by or before any court, arbitrator or Governmental Authority against Purchaser (i) in which any Person is seeking or is reasonably likely to seek to restrain or prohibit, or to obtain damages or other relief in connection with, this Agreement or the Related Purchaser Agreements or the transactions contemplated hereby or thereby, (ii) which if determined adversely to Purchaser would be reasonably likely to have a material adverse effect on Purchaser's ability to perform its obligations hereunder or to consummate the transactions contemplated hereby, (iii) which, if determined adversely to it, would be reasonably likely to have a material adverse effect on the assets, business, affairs, financial condition or operations of Purchaser or (iv) involving in whole or in part the issue of criminal liability by Purchaser or any of its officers, directors, employees or agents, or pertaining to its assets or business. Neither Purchaser nor any of its assets are subject to any outstanding judgment, order, writ, injunction or governmental or regulatory order or authority which would have a material adverse effect on this Agreement or any of the Related Purchaser Agreements. Purchaser is not presently engaged in any legal action to recover moneys due from damages caused by or to enforce its rights against any third party which would have a material adverse effect on this Agreement or any of the Related Purchaser Agreements. Section 4.7 Shares. The Shares have been validly authorized and, when issued as contemplated by this Agreement, will be validly issued, fully paid and non-assessable. Section 4.8 Capitalization of Purchaser. As of the date hereof, the authorized Capital stock of Purchaser consists of 20,000,000 shares of Common Stock, par value $.01 per share, of which 7,693,524 shares are issued and outstanding, and 6,000,000 of Preferred Stock, par value $.01 per share, of which 1,633,935 shares are issued and outstanding. Section 4.9 Capitalization of NEWCO. As of the date hereof, the authorized Capital stock of NEWCO consists of 1,000 shares of Common Stock, par alue $.01 per share, of which 100 shares are issued and outstanding. Section 4.10 Financial Statements. In all material respects, the December 31, 1997 financial statements of Purchaser (including any notes thereto) were prepared in accordance with generally accepted accounting principles applied on a consistent basis through the periods covered thereby (except as disclosed in such financial statements), and fairly present in all material respects the consolidated financial condition of Purchaser as of the dates thereof and the consolidated results of Purchaser's operations and consolidated cash flow for the periods then ended, subject, in the case of any unaudited interim financial statements, to the omission of certain notes not ordinarily accompanying such unaudited financial statements, and to normal year-end adjustments. Section 4.11 Absence of Adverse Change. Since December 31, 1997, there has not been any material adverse change in the assets, business, affairs, operations, financial condition or operations of Purchaser. Section 4.12 No Brokers. No broker, finder, investment broker or similar agent is or shall be entitled to receive any fee, commission or other remuneration or compensation relating to the transactions contemplated by this Agreement based on any action taken by or on behalf of Purchaser. Section 4.13 Corporate Documents. Purchaser has furnished, or will furnish to Seller true and complete copies or originals, as the case may be, of the following documents: (i) the articles of incorporation and bylaws of Purchaser; and (ii), if requested, the minute books of Purchaser containing all records required to be set forth of all proceedings, consents, actions and meetings of the shareholders and board of directors (and all committees thereof) of Purchaser. Section 4.14 Compliance with Laws. To Purchaser's knowledge and belief it is and has been in material compliance with all applicable federal, state, local and foreign laws, statutes, ordinances, rules, regulations, codes, licenses, permits, orders, judgments, decrees and other legal requirements (including, without limitation, those applicable to building, health, employment, labor, product liability, zoning, occupational safety, conservation, unfair competition, labor practices or corrupt practices) which affect or are applicable to its assets and business. Section 4.15 Full Disclosure. No representation, warranty or other statement by Purchaser in this Agreement, or in any schedule, exhibit, certificate, financial statement or other instrument or document furnished or to be furnished to Seller, contains or will contain any untrue statement of a material fact or omits or will omit any material fact necessary in order to make any of the statements contained herein or therein, when taken as a whole, not false or misleading in any material respect in light of the circumstances in which they were made. There is no fact or circumstance known to Purchaser that materially adversely affects, or in the future may be reasonably expected to (insofar as Purchaser can now reasonably foresee) materially adversely affect, the assets or the properties, liabilities, business, affairs, operations, condition (financial or otherwise) or prospects of Purchaser that has not been set forth herein or otherwise described to Seller. Section 5. Pre-Closing Covenants. -------------------- Section 5.1 Conduct of Business of Seller. (a) From the date of this Agreement until the Closing, Seller shall conduct its business only in the ordinary course consistent with past practices, including but not limited to (i) using its best efforts to (i) preserve intact its business organization and its good will, including its relationships with its suppliers, customers, lenders and others having business relationships with it, (ii) perform all its obligations in accordance with their terms, (iii) maintain the Assets in good operating condition, (iv) keep available the services of its present lessors, lessees, licensors, licensees, suppliers, customers, employees and agents, and (v) comply with all applicable laws, rules, regulations and orders. (b) Without limiting the generality of the foregoing, from the date of this Agreement until the Closing, Seller shall not, without the prior written consent of Purchaser: (i) Take any action referred to in Section 3.15(b) hereof; (ii) Take any action or omit to take any action which would breach any covenant or agreement of Seller herein; or (iii) Take any action which would cause any representation or warranty of Seller herein to be inaccurate in any material respect. Section 5.2 Access. (a) From the date of this Agreement through the Closing Date, Seller shall provide Purchaser and its officers, directors, employees and agents and representatives full access during normal business hours to the Assets and to the employees, agents, properties, books, contracts, accounts, commitments, records, tax returns and documents of Seller and shall furnish to Purchaser and its agents and representatives books, records, contracts, data and information concerning the Assets and the business and affairs of Seller as Purchaser and its agents and representatives may reasonably request. In the event that the transactions contemplated by this Agreement fail to be consummated, then Purchaser shall promptly return to Seller all data and information furnished to it and shall keep all such data and information confidential. No investigation pursuant to this Section 5.2(a) shall affect any representation or warranty of Seller or any condition to the closing obligations of Purchaser. (b) From the date of this Agreement through the Closing Date, Purchaser shall provide Seller and its officers, directors, employees and agents and representatives full access during normal business hours to the assets and to the employees, agents, properties, books, contracts, accounts, commitments, records, tax returns and documents of Purchaser and shall furnish to Seller and its agents and representatives data and information concerning the assets and the business and affairs of Purchaser as Seller and its agents and representatives may reasonably request. In the event that the transactions contemplated by this Agreement fail to be consummated, then Seller shall promptly return to Purchaser all data and information furnished to Seller and shall keep all such data and information confidential. No investigation pursuant to this Section 5.2(b) shall affect any representation or warranty of Purchaser or any condition to the closing obligations of Seller. Section 5.3 Risk of Loss. Until the Closing, Seller assumes all risk of loss, whether by reason of theft, fire, act of God, or other casualty, and Purchaser shall not be obligated to consummate the transactions contemplated hereby if here is any material loss of the Assets caused by any casualty, whether through the fault or negligence of Seller or otherwise. Section 5.4 Consummation of Transactions. Upon the terms and subject to the conditions of this Agreement, each of the parties hereto shall use its reasonable best efforts, and will cooperate with each other, to take, or cause to be taken, as promptly as practicable, all such actions and to do, or cause to be done, all other things necessary to carry out its obligations under this Agreement and under all other agreements contemplated by this Agreement and to consummate and make effective the transactions contemplated hereby and thereby, including obtaining all Consents which are necessary in connection with the transactions contemplated hereby and thereby, provided that Purchaser shall not be obligated to assume any additional liability of Seller or pertaining to the Assets other than the Assumed Liabilities. Section 5.5 Public Announcements. Until the Closing Date or the earlier Termination of this Agreement for any reason, Purchaser and Seller shall consult with each other before issuing any press releases or otherwise making any public statements or disclosures with respect to this Agreement or the transactions contemplated hereby (directly or through affiliates) and shall not issue any such press release or make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld, except that a party hereto may make a public statement without such consent to the xtent the same shall be required by applicable law, in which case such party should use its reasonable best efforts to advise the other party of such statement in a timely manner. Section 5.6 Notification of Certain Matters. From the date of this Agreement to the Closing Date, Purchaser and Seller each shall give prompt notice to the other of (a) the occurrence, or failure to occur, of any event, fact or circumstance the occurrence or failure of which would be reasonable likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect, or that breaches or is reasonably likely to breach any covenant or agreement set forth in this Agreement, and (b) any material failure on its part to comply with or satisfy any material covenant, condition or agreement to be complied with or satisfied by it hereunder. Section 5.7 Taxes. (a) Pre-Closing. Seller shall be responsible for the timely preparation of, all federal, state, local or foreign income, excise, withholding, property, sales, use, franchise and other tax returns, reports and forms of Seller pertaining to the Assets for all taxable periods ending on or before the Closing Date, and the payment of all amounts due thereunder. (b) Due to Transactions. Seller shall pay all federal, state and local sales, use, income, franchise, worker's compensation, unemployment documentary and other transfer taxes and fees arising out of the transfer of the Assets in accordance herewith,whether imposed by law on Seller or Purchaser, and shall pay its portion, prorated as of the Closing Date, of all federal, state, local and foreign personal property taxes relating to the Assets. Purchaser shall not be responsible for any business,occupation, withholding, or similar tax, or any taxes of any kind related to the Assets or the business being purchased for any period before the Closing Date. Seller shall indemnify, reimburse and hold Purchaser harmless in respect of any liability for payment of or failure to pay any such taxes or any filing of or failure to file any reports required in connection therewith. Section 5.8 No Shopping. From the date of this Agreement to the Closing Date, Neither Seller, STOCKHOLDER nor any affiliates thereof shall, directly or indirectly, through any officer, director, employee, agent or otherwise, solicit, initiate, or encourage the initiation orsubmission of inquiries, proposals or offers from, provide any information to, enter into any agreement with, or participate in any discussions or negotiations concerning any direct or indirect acquisition of any interest in Seller or any of the Assets (other than the sale of inventory and equipment in the ordinary course of business) by, any Person other than Purchaser. Seller shall immediately notify Purchaser of, and communicate to Purchaser the terms of any such inquiry, proposal or offer that Seller may receive. Section 5.9 Employee Matters. (a) Seller will pay, and remain responsible after the Closing, to all its employees for all compensation and benefits, including wages, salaries, commissions,bonuses, deferred compensation, severance, termination, insurance, pensions, profit-sharing, vacation, sick pay and other compensation or benefits ("Seller Employees Compensation") to which they are entitled for periods prior to the Closing Date. Until the Closing Date, Seller will not, without the prior written consent of Purchaser, change the compensation or benefits of any of its employees. (b) Purchaser is not assuming and shall have no obligation to pay any Seller Employees Compensation, whether accruing before, as a result of, or after the Closing. Seller shall perform, and Purchaser is not assuming and shall have no obligation to perform, any severance or termination obligations, liabilities and commitments accruing or arising by agreement, plan or policy of Seller as a result of the transactions contemplated hereby. (c) Purchaser may, but shall have no obligation to, offer employment to any of the current employees of Seller. Any employee of Seller considered for employment by Purchaser shall be subject to Purchaser's normal application and screening procedure and, if hired, shall be eligible for Purchaser's compensation and benefits policies. No provisions of this Agreement, express or implied, shall confer on any employee or former employee of Seller any right to employment or any continued right to employment for any extended period. (d) All claims and obligations under, pursuant to or in connection with any Employee Plans of Seller or arising under any legal requirement affecting employees of Seller incurred on or before the Closing Date resulting in or arising from events or occurrences occurring or commencing on or prior to the Closing Date shall remain the responsibility of Seller, whether or not such employees are hired by Purchaser after the Closing. Purchaser will have and assume no obligation or liability under or in connection with any such plan and will assume no obligation with respect to any pre-existing condition of any employee of Seller who is hired as an employee of Purchaser, except as required by applicable law. (e) Prior to Closing, Seller shall have entered into an agreement to amend that certain Client Services Agreement by and between Seller and PMSI, such agreement ensuring that PMSI and its agents and any employee of Seller under contract with PMSI, will agree that at all times, that any confidential information obtained or learned during the course of employment with NEWCO will remain confidential and will not be divulged to any person, firm or corporation without Purchaser's express written consent. (f) Subject to the terms of the Stockholder Agreement, Purchaser covenants and agrees that it will reserve shares of Purchaser's Common Stock valued at up to five percent (5%) of the Initial Consideration for issuance upon exercise of options (the "Options") granted from time to time to employees of NEWCO on and after the Closing Date as deemed appropriate by the management of NEWCO. The parties hereto agree that all of the Options issued to employees of NEWCO within thirty (30) days of the Closing Date will have an exercise price equal to $5.70 per share and that any Options issued after that date will have an exercise price equal to the Fair Market Value. Section 5.10 Assumed Warranty Obligations. At the Closing, Purchaser shall Assume at Purchaser's discretion certain warranty obligations of Seller (the "Assumed Warranty Obligations") for all equipment and products sold by Seller within two years prior to the Closing Date with respect to the Business. A complete and accurate list of all such sales (by customer, amount, sale and type of equipment or services) is set forth on Schedule 5.10 hereto. Section 5.11 Release of Liens. Contemporaneously with or prior to the Closing, Seller shall take all action necessary to cause any Liens on or against the Assets to be released and terminated as of the Closing date. Section 6. Conditions Precedent to Purchaser's Closing Obligations. The obligations of Purchaser to purchase the Assets and to assume the Assumed Liabilities and to take the other actions contemplated hereby to be taken by Purchaser at or prior to the Closing are subject to the satisfaction (unless waived in writing by Purchaser), at or prior to the Closing, of each of the following conditions. Section 6.1 Accuracy of Representations and Warranties. Each and every - -------------------------------- representation and warranty made by Seller in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as if made or given on the Closing Date. Section 6.2 Performance of Covenants. Seller shall have performed, satisfied And complied with all covenants, agreements, obligations and conditions under this Agreement which are to be performed, satisfied or complied with by Seller at or prior to the Closing. Section 6.3 No Litigation. No Proceeding shall be pending or overtly threatened by or before any court, arbitrator or Governmental Authority (a) which seeks the restraint, prohibition or the obtaining of damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, (b) which questions the legitimacy, validity or enforceability of this Agreement or the transactions contemplated hereby or (c) which, if successful, would have a Material Adverse Effect on the Assets or the Business or would materially and adversely affect the ability of Purchaser to consummate the transactions contemplated hereby or to operate the Business substantially as currently operated. Section 6.4 Deliveries at Closing. Seller shall have delivered to Purchaser at The Closing the Assets and each of the certificates, instruments, documents and agreements required to be delivered to Purchaser hereunder or reasonably necessary to consummate the transactions contemplated hereby. Section 6.5 Consents. All Consents of any Person necessary to permit the consummation of the transactions hereby shall have been duly obtained, made or taken prior to the Closing. Section 6.6 Condition of Assets. No event or change in circumstances, including but not limited to fire, accident, storm, or other casualty or labor or civil disputes or act of God or public enemy, shall have occurred (whether or not insured against) that in the reasonable judgment of Purchaser has or is reasonably likely to have a material adverse effect on the Assets or the value thereof or on the Business. Section 6.7 Employment Agreement. Purchaser and STOCKHOLDER shall have entered into a Senior Executive Employment Agreement pursuant to the terms and conditions of such agreement attached hereto as Annex III. Section 7. Conditions Precedent to Seller's Closing Obligations. The obligations of Seller to sell and deliver the Assets to Purchaser and to perform its other obligations contemplated hereby to be taken at or prior to the Closing are subject to the satisfaction (unless waived in writing by Seller), at or prior to the Closing, of each of the following conditions: Section 7.1 Accuracy of Representations and Warranties. Each of the Representations and warranties made by Purchaser in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date with the same effect as if made or given on the Closing Date. Section 7.2 Performance of Covenants. Purchaser shall have performed, satisfied and complied with all of the covenants, agreements, obligations and conditions under this Agreement which are to be performed, satisfied or complied with by Purchaser at or prior to the Closing. Section 7.3 No Litigation. No proceeding shall be pending or overtly threatened before any court, arbitrator or Governmental Authority which seeks the restraint, prohibition or the obtaining of damages or other relief in connection with this Agreement or the consummation of the transactions contemplated hereby, which questions the legitimacy, validity or enforceability of this Agreement or the transactions contemplated hereby or which, if successful, would have a material adverse effect on the Purchaser's assets or business or would materially and adversely affect the ability of Purchaser to consummate the transactions contemplated hereby or for Purchaser to operate its business substantially as currently operated. Section 7.4 Deliveries at Closing. Purchaser shall have delivered to Seller a the Closing the Consideration pursuant to Section 2.1 herein and each of the other certificates, instruments, documents and agreement required to be delivered to Seller hereunder. Section 7.5 Employment Agreement. Purchaser and STOCKHOLDER shall have entered into a Senior Executive Employment Agreement pursuant to the terms and conditions of such agreement attached hereto as Annex III. Section 8. The Closing. Section 8.1 Date and Place. The consummation of the sale and purchase of the Assets contemplated hereby (the "Closing") shall take place at the offices of Swidler & Berlin, Chartered at 3000 K Street, N.W., Washington, D.C. at ten a.m. local time, on, 1998, or at such other time, date or place as the parties shall mutually agree (the "Closing Date"). Section 8.2 Deliveries by Seller. At the Closing, Seller and STOCKHOLDER shall deliver or cause to be delivered to Purchaser, in form reasonably acceptable to Purchaser's counsel: (a) Full, actual and unimpeded possession and enjoyment of the Assets; (b) Assignments and assumptions of all Assigned Contracts being assumed by and assigned to Purchaser, duly executed by Seller, along with all consents required to permit such assignment and assumption; (c) One or more duly executed bills of sale warranting good and marketable title in and to the Assets, and such other instruments of sale, conveyance, assignment and transfer as may be reasonably requested by Purchaser, in order to vest in Purchaser all of Seller's right, title and interest in and to all of the other Assets, free and clear of all Liens, Consents, restrictions or obligations to any third party, of any kind whatsoever; (d) All assignments required to transfer any Intellectual Property to Purchaser; (e) All Consents necessary to permit the consummation of the transactions contemplated by this Agreement; (f) All releases of all Liens encumbering any of the Assets; (g) True and complete copies of corporate resolutions, certified as of the Closing Date by the Secretary of Seller as having been duly adopted by the Board of Directors and, if necessary, shareholders of Seller authorizing Seller's and STOCKHOLDER'S execution and delivery of this Agreement and the Related Seller Agreements and their consummation of the transactions contemplated hereby and thereby; (h) Certificates duly executed by the President or Chief Executive Officer of Seller and by STOCKHOLDER, dated as of the Closing Date, certifying that, to the best of their knowledge and belief after due inquiry, (i) each of Seller and STOCKHOLDER, respectively, has fully performed, satisfied and complied with all agreements, obligations, covenants and conditions required by this Agreement to be performed, satisfied or complied with at or prior to the Closing, and (ii) all of the representations and warranties of Seller and STOCKHOLDER, respectively, set forth in Section 3 of this Agreement are true and correct as of the Closing Date; (i) An opinion of counsel for Seller, dated as of the Closing Date, substantially in the form attached hereto as Annex I; (j) The Senior Executive Employment Agreement, duly executed by STOCKHOLDER; (k) STOCKHOLDER shall have delivered to Purchaser an instrument dated the Closing Date releasing Purchaser and NEWCO from any and all obligations to the STOCKHOLDER, except for (x) continuing obligations to the STOCKHOLDER relating to his employment by NEWCO and (y) obligations arising under this Agreement or the transactions contemplated hereby; (l) STOCKHOLDER shall have executed a Joinder Agreement substantially in the form attached hereto as Annex IV binding him and all his shares of Purchaser Stock to the provisions of the Amended and Restated Stockholders' Agreements of ITP dated March 31, 1998 (the "Stockholders' Agreement"); (m) Seller shall have executed a Subordination Agreement substantially in the form attached hereto as Annex VII relating to the First Note and the Tax Note, and will execute a Subordination Agreement for any and all subsequent notes; and (n) All other items required to be delivered by Seller or STOCKHOLDER pursuant to any provision of this Agreement. Section 8.3 Deliveries by Purchaser. At the Closing, Purchaser shall deliver to Seller, in form reasonably acceptable to Seller's counsel: (a) The Cash Portion of the Purchase Price as set forth in Section 2.1(a)(i) hereof, by cashier's or certified bank check or wire transfer of immediately available funds to an account designated by Seller; (b) One or more certificates representing the Initial Shares, duly registered on the books of ITP in the name of Seller; (c) The First Note, duly executed by Purchaser; (d) The Tax Note duly executed by Purchaser; (e) True and complete copies of corporate resolutions, certified as of the Closing Date by the Secretary of Purchaser as having been duly adopted by the Board of Directors of Purchaser, respectively, authorizing Purchaser's execution and delivery of this Agreement and the Related Purchaser Agreements and their consummation of the transactions contemplated hereby and thereby; (f) Certificates duly executed by the Chairman of the Board, President or Chief Executive Officer of Purchaser, dated as of the Closing Date, certifying that, to the best of their knowledge and belief after due inquiry, (i) Purchaser has fully performed, satisfied and complied with all agreements, obligations, covenants and conditions required by this Agreement to be performed, satisfied or complied with by Purchaser at or prior to the Closing, and (ii) all of the representations and warranties of Purchaser set forth in Section 4 of this Agreement are true and correct as of the Closing Date; (g) An opinion of counsel for the Purchaser, dated as of the Closing Date, substantially in the form attached hereto as Annex II; and (h) All other items required to be delivered by Purchaser pursuant to any provision of this Agreement. Section 8.4 Effectiveness of Closing. No action to be taken or delivery to be made at the Closing shall be effective until all of the actions to be taken and deliveries to be made at the Closing are complete. Section 9. Survival and Indemnification. Section 9.1 Survival. The indemnification obligations and the representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing and shall continue in full force and effect until they expire on the second anniversary of the Closing Date (or such later date as expressly provided herein), regardless of any investigation made by any party hereto, except as to any Claims relating to fraud, environmental, intellectual or tax matters, which claims shall expire only upon expiration of the applicable statute of limitations. No Claim pursuant to this Section 9 shall be asserted by any party hereto after the expiration of the applicable survival period or statute of limitations, as the case may be, except for Claims made in writing prior to such expiration or actions (whether instituted before or after such expiration) based on any Claim made in writing prior to such expiration. Section 9.2 Indemnification by the Seller and STOCKHOLDER. Seller and STOCKHOLDER shall jointly and severally indemnify, defend and hold harmless Purchaser, NEWCO, their affiliates, successors and assigns, and the officers, directors, shareholders, partners, employees, agents and representatives of any of them, harmless from and against, any and all claims, actions, suits, proceedings demands, losses, expenses, obligations, taxes, liabilities, damages, recoveries and deficiencies (including, without limitation, interest, fines, penalties, costs of investigation, reasonable attorneys', accountants' and other professionals' fees and expenses and amounts paid in settlement) (collectively, "Damages") arising out of, based upon or resulting from (i) any breach or violation of, inaccuracy or misrepresentation in, or failure by the Seller or STOCKHOLDER to perform, any representations, warranties, covenants, agreements or other obligations of Seller or STOCKHOLDER made in this Agreement or in any schedule, certificate, exhibit, annex or other document or instrument furnished or to be furnished by Seller or STOCKHOLDER to Purchaser pursuant to this Agreement, (ii) any debt, liability or obligation of Seller or STOCKHOLDER not included in the Assumed Liabilities, (iii) any failure by Seller or STOCKHOLDER to completely and timely comply with all applicable provisions of (A) any WARN or similar state or local laws or (B) the fraudulent transfer or fraudulent conveyance laws of any jurisdiction, (iv) any statute or common law doctrine of de facto merger or successor liability or (v) any product liability claims relating to products made or sold or services performed by Seller or STOCKHOLDER prior to the Closing Date. Notwithstanding the foregoing, any adjustment to the Working Capital balance as of the Closing Date pursuant to Section 2.2 above shall not constitute a basis for a further Claim for Damages hereunder. Section 9.3 Indemnification by Purchaser and ITP. Purchaser shall indemnify, defend and hold harmless Seller and STOCKHOLDER, their affiliates, successors and assigns, and the officers, directors, shareholders, partners, employees, agents and representatives of any of them, from and against, any and all Damages arising out of, based upon or resulting from any breach or violation of, inaccuracy or misrepresentation in, or failure by Purchaser to perform, any of the representations, warranties, covenants, agreements or other obligations of Purchaser made in this Agreement or in any schedule, certificate, exhibit, Annex or other document or instrument furnished or to be furnished by Purchaser to Seller or STOCKHOLDER pursuant to this Agreement. Section 9.4 Claims for Indemnification. (a) Whenever any party hereunder believes it has suffered or incurred or is likely to suffer or incur any Damages, or any action or proceeding is commenced or threatened or claim is made that could result in Damages, which is reasonably likely to give rise to a claim ("Claim") for indemnification under this Agreement, the party seeking indemnification ("Indemnified Party") shall, upon obtaining knowledge thereof, promptly notify in writing the party against whom indemnification is sought ("Indemnifying Party") of the Claim and, when known, the facts constituting the basis for such Claim and the amount and nature of the Damages or an estimate thereof. The Indemnified Party's failure to timely notify Indemnifying Party of any Claim or potential Claim shall not relieve the Indemnifying Party of any liability hereunder unless and only to the extent that such failure causes Indemnifying Party to lose the right to assert any substantive rights or defenses or to the extent that the Indemnifying Party is actually prejudiced in its rights or obligations. (b) The Indemnified Party shall give the Indemnifying Party a reasonable opportunity to participate in and to assume the defense of any such Claim at the Indemnifying Party's own expense and with counsel of the Indemnifying Party's own selection reasonably satisfactory to the Indemnified Party provided, however, that Indemnified Party shall at all times also have the right but not the obligation, to fully participate in the defense of the Claim and to employ its own counsel at its own expense. Notwithstanding the foregoing, if the Indemnified Party reasonably determines that: (i) legal defenses may be available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party, (ii) a conflict or potential conflict of interest exists between the Indemnified Party and the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such Claim on behalf of the Indemnified Party), or (iii) the Indemnifying Party has not in fact employed legal counsel to assume the defense of such Claim within a reasonable time after receiving notice of the Claim, then the reasonable fees, disbursements and other charges of counsel from one separate firm selected by the Indemnified Party (and reasonably acceptable to the Indemnifying Party) shall be reimbursed by the Indemnifying Party promptly as they are incurred. (c) No party hereto shall compromise, settle or consent to the entry of any judgment with respect to any Claim without the prior written consent of the other interested party or parties (which consent shall not be unreasonably withheld or delayed) unless such compromise, settlement or consent includes an unconditional release of all other interested parties hereto from any and all liabilities on any Claims that are the subject matter thereof. (d) Each party hereto shall cooperate in every reasonable way with the party assuming responsibility for the defense and disposition of any such Claim, including making available to the defending party all books, records, and other material reasonably required by the defending party for its use in defending the Claim. Section 9.5 Limitation on Liability. (a) Notwithstanding the foregoing, the Indemnifying Party shall not be required to indemnify the Indemnified Party hereunder unless and until and only to the extent that the aggregate amount of all Damages exceeds $100,000.00. (b) Neither party shall seek or be entitled to consequential damages or damages for lost profits in any Claim for indemnification under this Section 9 nor shall it accept payment of any award or judgment against the other party to the extent that such award or judgment includes consequential damages or damages for lost profits. Section 9.6 Non-Exclusive Indemnification. The foregoing indemnification provisions are in addition to, and not in derogation of, or statutory, equitable or common law remedies any party hereto may have for any breach of representation, warranty, covenant or agreement. Section 9.7 Effect of Knowledge. No disclosure to and no investigation by or on behalf of any party hereto, other than disclosures made in the Schedules hereto, shall be deemed to affect its reliance on the representations, warranties, covenants and agreements contained herein or to waive its rights to indemnification as provided herein for the breach or violation of or inaccuracy or failure to perform or comply with any representation, warranty, covenant or agreement of any other party hereto. Section 9.8 Contribution. If the indemnification provided for in this Section 9 is for any reason unavailable or insufficient to indemnify the Indemnified Party in respect of any Damages, then the Indemnifying Party shall in lieu of indemnifying the Indemnified Party contribute to the total damages to which the Indemnified Party may be subject in such proportion that shall be appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand, in connection with any actions or omissions which resulted in such Damages as well as any other relevant equitable considerations; provided, however, that the amount of any such contribution obligation shall not exceed what would otherwise be the amount of the Indemnifying Party's indemnification obligation hereunder. Section 10. Post-Closing and Other Covenants. Section 10.1 Further Assurances. At the Closing, Seller, through its officers, directors, employees and agents, shall put Purchaser into full, actual and unimpaired ownership, possession, enjoyment and control of the Assets. At any time and from time to time after the Closing, Seller shall, at the sole expense of Purchaser, execute, acknowledge and deliver any further deeds, assignments, conveyances, consents, permits and other assurances, documents and instruments of transfer reasonably requested by Purchaser, and take any and all further actions consistent with the terms of this Agreement, that may be reasonably requested by Purchaser for the purpose of more effectively and fully assigning, transferring, granting and conveying to and vesting in Purchaser all of Seller's right, title and interest in and to, or reducing to possession, any or all of the Assets. If requested by Purchaser, Seller shall, solely at Purchaser's expense (unless required due to a breach of any representation, warranty, or covenant hereof by Seller), prosecute or otherwise enforce in its own name for the benefit of Purchaser any claims, rights or benefits that are transferred to Purchaser by this Agreement and require prosecution and enforcement in Seller's name. Section 10.2 Preservation of Files and Records. (a) By Purchaser. For a period of 3 years after the Closing Date, Purchaser shall preserve all files and records relating to the Business and the Assets that are in existence as of the Closing Date and that are less than 5 years old as of the Closing Date, and shall allow Seller access to such files and records and the right to make copies and extracts therefrom at any time during normal business hours, and shall not dispose of any thereof, provided that at any time after the Closing, Purchaser may give Seller written notice of its intention to dispose of any part thereof, specifying the items to be disposed of in reasonable detail. Seller may, within a period of sixty (60) days after receipt of any such notice, notify Purchaser of Seller's desire to retain one or more of such items to be disposed of. Purchaser shall, upon receipt of such notice from Seller, deliver to Seller at Seller's expense, the items specified in Purchaser's notice to Seller which Seller has elected to retain. (b) By Seller. For a period of three (3) years after the Closing Date, Seller shall preserve all files and records relating to the Business and the Assets that are in existence as of the Closing Date not otherwise delivered to Purchaser and that are less than five (5) years old as of the Closing Date, and shall allow Purchaser access to such files and records and the right to make copies and extracts therefrom at any time during normal business hours, and shall not dispose of any thereof, provided that at any time after the Closing, Purchaser may give Seller written notice of its intention to dispose of any part thereof, specifying the items to be disposed of in reasonable detail. Purchaser may, within a period of sixty (60) days after receipt of any such notice, notify Seller of Purchaser's desire to retain one or more of such items to be disposed of. Purchaser shall, upon receipt of such notice from Seller, deliver to Purchaser at Purchaser's expense, the items specified in Purchaser's notice to Seller which Purchaser has elected to retain. Section 10.3 Mutual Cooperation. (a) Preparation of Reports, Etc. Each of Purchaser and Seller shall cooperate and cause its respective employees and agents to cooperate with each other in the preparation of financial and other reports and statements relating to the Business and the Assets for periods ending on or prior to the Closing. (b) Taxes and Other Matters. In connection with the preparation of any tax returns, any audit or other examination by any taxing or other Governmental Authority, or any Proceeding or other matters including but not limited to, environmental and other matters relating to the transactions contemplated by this Agreement, each party will provide the other with the opportunity to make copies of any records or information which may be relevant to such return, audit or examination, Proceeding or determination. Each party shall make its employees available on a mutually convenient and reasonable basis to provide additional information and explanation of any material provided hereunder. (c) Cooperation in Litigation. In the event that, after the Closing Date, Seller or Purchaser shall reasonably require the participation of officers and employees by each other to aid in the defense or prosecution of litigation or claims, and so long as there exists no unwaived conflict of interest between the parties, each of Seller and Purchaser shall make such officers and employees reasonably available to participate in such defense or prosecution provided that, except as required pursuant to the provisions herein, the party requiring the participation of such officers and employees shall pay all reasonable out-of-pocket costs, charges and expenses arising from such participation. Section 10.4 Solicitation and Hiring. (a) STOCKHOLDER's Covenant. For a period of five (5) years after the Closing Date, STOCKHOLDER, shall not, directly or indirectly, as a stockholder, investor, partner, director, officer, employee or otherwise (i) solicit or attempt to induce any employee to terminate his or her employment with NEWCO or Purchaser, or (ii) hire or attempt to hire any employee of Purchaser. Section 10.5 Seller's and STOCKHOLDER's Right of First Refusal to Acquire NEWCO. (a) Proposed Transaction. From and after the Drop Down, if Purchaser intends or proposes to sell all or substantially all of the assets and capital stock of NEWCO to a Person other than an affiliate or subsidiary of Purchaser ("Proposed Purchaser"), or to consummate the merger, consolidation or combination into a Proposed Purchaser in which transaction NEWCO is not the survivor (a "Proposed Transaction"), unless the Proposed Transaction is with a strategic purchaser, as reasonably determined by Purchaser, Purchaser shall first deliver to Seller a notice of such Proposed Transaction ("Notice of Proposed Sale") which shall include a copy or summary of the Proposed Transaction and the terms and conditions thereof in reasonable detail, including, without limitation, the proposed purchase price (or the basis of determining the purchase price) ("Proposed Purchase Price") and the terms and conditions of payment. (b) Exercise. Seller shall have the prior right and option ("Right of First Refusal"), unless the Proposed Transaction is with an affiliate, subsidiary or strategic purchaser, to consummate the Proposed Transaction in the place of the Proposed Purchaser upon the terms set forth in the Notice of Proposed Sale, or on such other terms and conditions, no less favorable to Purchaser and NEWCO, from Purchaser's and NEWCO's perspective and as determined in their sole discretion, as the terms in the Notice of Proposed Sale. Seller shall exercise its Right of First Refusal by giving written notice of such exercise ("Notice of Exercise") to Purchaser on or before the thirtieth (30) day after Seller shall have received the Notice of Proposed Sale. Seller, with the consent of Purchaser, may assign this Right of First Refusal to STOCKHOLDER, such consent not to be unreasonably withheld. (c) Non-Exercise of Rights of First Refusal. If Seller does not exercise its Right of First Refusal, then ITP or Purchaser shall have the right, for a period ending on the 150th day after the delivery of Notice of Proposed Sale, to consummate the Proposed Transaction with the Proposed Purchaser, at substantially the same Proposed Purchase Price and otherwise upon substantially the same terms and conditions described in the Notice of Proposed Sale. Section 11. Termination and Confidentiality. Section 11.1 Events of Termination. This Agreement may be terminated at any time prior to the Closing as follows: (a) By mutual written agreement of Seller and Purchaser; (b) By Seller or Purchaser if (i) the non-terminating party shall have failed to perform, satisfy or comply with any of its, obligations, agreements, or covenants to be performed, satisfied, or complied with hereunder prior to the Closing, or (ii) the non-terminating party materially breaches any of its representations, warranties or covenants hereunder; (c) By any party hereto by giving written notice to the other parties hereto if the Closing Date has not occurred on or before May 15, 1998, unless such party's intentional failure to fulfill any obligation hereunder has been the cause of, or has resulted in, the failure of the Closing to occur on or before such date; or (d) By Purchaser or Seller if any court or Governmental Authority of competent jurisdiction shall have issued an order, judgment, decree, ruling or taken other action restraining, enjoining or otherwise prohibiting the transaction contemplated hereby. Section 11.2 Effect of Termination. If any party terminates this Agreement in accordance with Section 11.1, then all rights and obligations of the parties shall cease, except for the obligations set forth in Sections 11.3 and 12.2 which shall survive such termination; provided, however, that any termination of this Agreement shall not affect the rights or either Seller or Purchaser against the other for breach of any representation, warranty, covenant or agreement set forth in this Agreement. Section 11.3 Confidentiality. Notwithstanding the provisions of this Section 11, if for any reason the transactions contemplated by this Agreement are not consummated, each of the parties hereto shall keep confidential any information obtained from any other party (except information publicly available or in such party's domain prior to the date hereof, and except as required by court order) and shall not use any such information to the detriment of the other party and shall promptly return to the other party all schedules, documents, instruments, work papers or other written information, without retaining copies thereof, previously furnished by it as a result of this Agreement or in connection herewith. Section 12. General Provisions. Section 12.1 Governing Law. This Agreement shall in all respects be governed by and construed and enforced in accordance with the internal substantive laws of the State of Maryland, without giving effect to any principle or rule of conflict or choice of laws. Any action suit, or other proceeding seeking to enforce any right, remedy, obligation, duty, covenant or provision of, or arising out of, this Agreement shall be brought and entered against any party hereto exclusively in any federal or state court of the State of Utah or of the United States located in the State of Utah. Each party hereto irrevocably submits to the personal jurisdiction of any such court and irrevocably waives, to the fullest extent of the law, any objection that it may now or hereafter have to the laying of venue in any such court and any claim that such action, suit or proceeding has been brought in an inconvenient form. Section 12.2 Expenses. Except as expressly provided herein, each of the parties to this Agreement agrees to pay its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including the fees and expenses of its counsel, accounting and other advisers and agents. Section 12.3 Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned or transferred by any party hereto without either party giving at least ninety (90) days prior written notice to all other parties hereto, provided, however, that Purchaser may, without providing notice to Seller, sell, assign, transfer or delegate its rights or obligation, under this Agreement to NEWCO or any of its affiliates, in which case such assignee or transferee shall be substituted for Purchaser hereunder as though it was the original party to this Agreement, and Purchaser shall be released from all its obligations under this Agreement. Section 12.4 Amendments. This Agreement may not be supplemented, amended or modified in any manner in whole or in part except by a writing signed by all parties to this Agreement that specifically states that it amends this Agreement. Section 12.5 Notices. Any and all notices, requests, demands and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given hereunder if delivered personally, or if sent by facsimile transmission (upon receipt of confirmation of delivery), on the next business day if sent by overnight courier service, or three business days after being sent by first class (registered/certified) mail, postage prepaid, return receipt requested, to the parties at the following addresses: If to Purchaser: 9881 Broken Land Parkway Suite 102 Columbia, Maryland 21046 Attn: Daniel J. Klein Telephone: (410) 309-9800 Facsimile: (410) 309-9801 With a copy to:Swidler & Berlin, Chartered 3000 K Street, N.W. Suite 300 Washington, D.C. 20007 Attn: Andrew M. Ray Douglas C. Boggs Telephone: (202) 424-7782 Facsimile: (202) 424-7645 If to STOCKHOLDER: 1141 East Lost Eden Drive Sandy, Utah 84094 Attn: Stanton L. Call Telephone: (801) 571-7087 With a copy to: Ray, Quinney & Nebeker 400 Deseret Building 79 South Main Street Salt Lake City, Utah 84145-0385 Attn: Gerald T. Snow Telephone: (801) 532-1500 Facsimile: (801) 532-7543 Any party may change its designated address by giving written notice thereof to all other parties hereto in the manner provided in this Section 12.5. Any party hereto may send any notice, request, demand, or other communication to the intended recipient at the address above by using any other means (such as telecopy, telex, expedited courier, messenger, ordinary mail or electronic mail), but no such notice, demand, request or other communication shall be deemed to have been given until it is actually received by the recipient. Section 12.6 Waiver. The obligations of any party hereto may be waived only with the written consent of the party giving the waiver. Any waiver by any party of a breach of any provision of this Agreement shall not operate or be construed to be a waiver of any other breach of that provision or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any provision of this Agreement on one or more occasions shall not be considered a continuing waiver or deprive that party of the right thereafter to insist upon strict adherence to that provision or any other provision of this Agreement. Section 12.7 Severability. If any provision of this Agreement is invalid, illegal or unenforceable in any situation, the balance of this Agreement shall remain in effect, and such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of that provision in any other situation or legality, validity or enforceability of any other provision of this Agreement. Section 12.8 Headings. The headings used in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement. Section 12.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Section 12.10 Pronouns, etc. The number and gender of each pronoun used in this Agreement and the term "person" or "persons" or the like shall be construed to mean both the number and gender of the individual, corporation, limited liability company, partnership, firm, trust, agency and other entity as the context, circumstance or its antecedent may require. The terms "herein," "hereof," "hereby," "hereto" and the like refer to this Agreement as a whole. Section 12.11 No Third Party Beneficiaries. Except as expressly provided in this Agreement, this Agreement does not confer or create, is not intended by the parties hereto to confer or create, and shall not be construed as conferring or creating, upon any person or entity other than the parties hereto and their successors and permitted assigns any rights, remedies or causes of action under or by reason of this Agreement. Section 12.12 Schedules, Exhibits and Annexes. The schedules, exhibits and annexes attached to this Agreement are incorporated into and made a part of this Agreement as if they were fully set forth herein. Section 12.13 Specific Performance; Cumulative Remedies. The parties hereto acknowledge and agree that the transactions contemplated by this Agreement are unique in that remedies at law for any breach or threatened breach of this Agreement would be an inadequate remedy for any loss, and that any defense in any action for specific performance that a remedy at law would be adequate is hereby specifically waived. Accordingly, in the event of any actual or threatened breach to any of the terms of this Agreement, the non-breaching party shall have the right of specific performance and injunctive relief giving effect to its rights under this Agreement, in addition to any and all other rights and remedies, at law or in equity, and all such rights and remedies are cumulative. Section 12.14 Counterparts. This Agreement may be executed in one or more counterparts, including counterparts executed by less than all parties hereto, by facsimile or otherwise, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Section 12.15 Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous arrangements, agreements and understandings, whether oral or written, among the parties hereto in connection with the subject matter of this Agreement. ( Next page is the Signature Page). IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be executed and delivered by their duly authorized officers as of the date first above written. PURCHASER: IT PARTNERS, INC. By: /s/ Daniel J. Klein ----------------------- Daniel J. Klein Title: President SELLER: CALL BUSINESS SYSTEMS, INC. By: /s/Stanton L. Klein --------------------- Title: STOCKHOLDER: STANTON L. CALL By: Stanton L. Call (Print Name) /s/ Stanton L. Call -------------------- (Signature) EX-10.3 12 A-COM BUSINESS COMBINATION AGREEMENT BUSINESS COMBINATION AGREEMENT Dated as of June 30, 1997 By and Among ITP ACQUISITION CORP. and IT PARTNERS, INC. and A-COM, INC. and CHRISTOPHER CORBETT and MERRIE CORBETT TABLE OF CONTENTS DEFINITIONS PAGE Section 1.1. Affiliate. . . . . . . . . . . . . . . . . .1 Section 1.2. Balance Sheet. . . . . . . . . . . . . . . .1 Section 1.3. Benefit Arrangements . . . . . . . . . . . .1 Section 1.4. Buyer. . . . . . . . . . . . . . . . . . . .2 Section 1.5. Buyer's Accountants. . . . . . . . . . . . .2 Section 1.6. Capital Liabilities. . . . . . . . . . . . .2 Section 1.7. Citibank Rate. . . . . . . . . . . . . . . .2 Section 1.8. Closing. . . . . . . . . . . . . . . . . . .2 Section 1.9. Closing Balance Sheet. . . . . . . . . . . .2 Section 1.10. Closing Date . . . . . . . . . . . . . . . .2 Section 1.11. Code . . . . . . . . . . . . . . . . . . . .2 Section 1.12. Confidentiality Agreement. . . . . . . . . .2 Section 1.13. Corporation. . . . . . . . . . . . . . . . .2 Section 1.14. Dispute Resolution Firm. . . . . . . . . . .2 Section 1.15. Employee . . . . . . . . . . . . . . . . . .2 Section 1.16. Employee Benefit Plan. . . . . . . . . . . .2 Section 1.17. ERISA. . . . . . . . . . . . . . . . . . . .3 Section 1.18. Excluded Assets. . . . . . . . . . . . . . .3 Section 1.19. Excluded Liabilities . . . . . . . . . . . .3 Section 1.20. Exhibit. . . . . . . . . . . . . . . . . . .3 Section 1.21. Final Closing Balance Sheet. . . . . . . . .3 Section 1.22. Final Net Asset Value. . . . . . . . . . . .3 Section 1.23. Financials Date. . . . . . . . . . . . . . .3 Section 1.24. Guarantees . . . . . . . . . . . . . . . . .3 Section 1.25. H-S-R Act. . . . . . . . . . . . . . . . . .3 Section 1.26. Individual Returns . . . . . . . . . . . . .3 Section 1.27. Individual Taxes . . . . . . . . . . . . . .3 Section 1.28. Intellectual Property. . . . . . . . . . . .3 Section 1.29. IRS. . . . . . . . . . . . . . . . . . . . .4 Section 1.30. Material . . . . . . . . . . . . . . . . . .4 Section 1.31. Material Adverse Effect. . . . . . . . . . .4 Section 1.32. Material Contracts . . . . . . . . . . . . .4 Section 1.33. MGAAP. . . . . . . . . . . . . . . . . . . .4 Section 1.34. Net Asset Value. . . . . . . . . . . . . . .4 Section 1.35. Offering Memorandum. . . . . . . . . . . . .4 Section 1.36. PBGC . . . . . . . . . . . . . . . . . . . .4 Section 1.37. Person . . . . . . . . . . . . . . . . . . .4 Section 1.38. Proposed Closing Balance Sheet . . . . . . .4 Section 1.39. Purchase Price . . . . . . . . . . . . . . .4 Section 1.40. Retirement Plan. . . . . . . . . . . . . . .4 DEFINITIONS PAGE Section 1.41. Schedule . . . . . . . . . . . . . . . . . .5 Section 1.42 Securities Act . . . . . . . . . . . . . . .5 Section 1.43. Seller . . . . . . . . . . . . . . . . . . .5 Section 1.44. Seller's Accountants . . . . . . . . . . . .5 Section 1.45. Senior Debt. . . . . . . . . . . . . . . . .5 Section 1.46. Shares . . . . . . . . . . . . . . . . . . .5 Section 1.47. Subordinated Debt. . . . . . . . . . . . . .5 Section 1.48. Subsidiary . . . . . . . . . . . . . . . . .5 Section 1.49. Transaction Document . . . . . . . . . . . .5 ARTICLE II. PURCHASE AND SALE OF SHARES Section 2.1. Sale . . . . . . . . . . . . . . . . . . . .5 Section 2.2. Excluded Liabilities . . . . . . . . . . . .5 Section 2.3. Purchase Price and Allocation. . . . . . . .6 Section 2.4. Adjustment of Purchase Price . . . . . . . .6 Section 2.5. Board of Directors Membership; Amendments to Buyer's By-Laws . . .. . . . .7 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER Section 3.1. Organization and Good Standing . . . . . . .7 Section 3.2. Capitalization . . . . . . . . . . . . . . .8 Section 3.3. Ownership of the Shares. . . . . . . . . . .8 Section 3.4. Execution and Effect of Agreement. . . . . .8 Section 3.5. Consents . . . . . . . . . . . . . . . . . .8 Section 3.6. Balance Sheet. . . . . . . . . . . . . . . .9 Section 3.7. Absence of Certain Changes . . . . . . . . .9 Section 3.8. Litigation . . . . . . . . . . . . . . . . 10 Section 3.9. Properties; Absence of Encumbrances. . . . 10 Section 3.10. Intellectual Property. . . . . . . . . . . 10 Section 3.11. Contracts. . . . . . . . . . . . . . . . . 11 Section 3.12. Employees; Employee Benefit Matters. . . . 11 Section 3.13. Guarantees by Others . . . . . . . . . . . 12 Section 3.14. Tax Matters. . . . . . . . . . . . . . . . 12 Section 3.15. Compliance with Law And Other Instruments; Regulatory Matters . . . . . . . . . . . 13 Section 3.16. Permits . . . . . . . . . . . . . . . . . 13 Section 3.17. Environmental Matters . . . . . . . . . . 13 Section 3.18. Insurance . . . . . . . . . . . . . . . . 14 Section 3.19. Banks; Powers of Attorney. . . . . . . . . 14 Section 3.20. Brokerage Fees . . . . . . . . . . . . . . 14 Section 3.21. Limitation of Representations and Warranties14 DEFINITIONS PAGE ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF BUYER Section 4.1. Organization and Good Standing . . . . . . 14 Section 4.2. Investment Representation. . . . . . . . . 14 Section 4.3. Execution and Effect of Agreement. . . . . 15 Section 4.4. Restrictions . . . . . . . . . . . . . . . 15 Section 4.5. No Lawsuits; Consents. . . . . . . . . . . 15 Section 4.6. Limitation of Representations and Warranties15 ARTICLE V. COVENANTS AND AGREEMENTS QF SELLER Section 5.1. Corporate Action . . . . . . . . . . . . . 16 Section 5.2. Conduct of Business to Closing . . . . . . 16 Section 5.3. Consents . . . . . . . . . . . . . . . . . 17 Section 5.4. Covenant Against Competition . . . . . . . 17 Section 5.5. Capital Liabilities. . . . . . . . . . . . 18 Section 5.6. Access to Information and Cooperation After Closing18 Section 5.7. Public Statements. . . . . . . . . . . . . 18 ARTICLE VI. COVENANTS AND AGREEMENTS OF BUYER Section 6.1. Corporate Action . . . . . . . . . . . . . 19 Section 6.2. Public Statements. . . . . . . . . . . . . 19 Section 6.3. Consents . . . . . . . . . . . . . . . . . 19 Section 6.4. Certain Employee Benefit Matters . . . . . 19 Section 6.5. Preservation of and Access to Certain Information and Cooperation After Closing . . . . . . 20 Section 6.6. Nondisposition of Shares . . . . . . . . . 20 ARTICLE VII. CONDITIONS OF OBLIGATIONS OF BUYER Section 7.1. Representations and Warranties True. . . . 21 Section 7.2. Covenants and Agreements--No Default . . . 21 Section 7.3. Officer's Certificates . . . . . . . . . . 21 Section 7.4. No Material Adverse Change . . . . . . . . 21 Section 7.5. Consents . . . . . . . . . . . . . . . . . 21 Section 7.6. Transaction Documents. . . . . . . . . . . 22 Section 7.7. Adverse Proceedings. . . . . . . . . . . . 22 PAGE ARTICLE VIII. CONDITIONS OF OBLIGATIONS OF SELLER Section 8.1. Representations and Warranties True. . . . 22 Section 8.2. Covenants and Agreements--No Default . . . 22 Section 8.3. Officer's Certificates . . . . . . . . . . 23 Section 8.4. Consents . . . . . . . . . . . . . . . . . 23 Section 8.5. Transaction Documents. . . . . . . . . . . 23 Section 8.6. Adverse Proceedings. . . . . . . . . . . . 23 ARTICLE IX. INTENTIONALLY OMITTED ARTICLE X. CLOSING Section 10.1. Closing. . . . . . . . . . . . . . . . . . 23 Section 10.2. Documents to be Delivered by Seller. . . . 24 Section 10.3. Documents to be Delivered by Buyer . . . . 24 ARTICLE XI. MISCELLANEOUS Section 11.1. Survival of Representations, Warranties, Covenants and Agreements. . . . .. . . . . 25 Section 11.2. Indemnification. . . . . . . . . . . . . . 25 Section 11.3. Disclaimer of Other Representations and Warranties by Seller . . . . . . . . . . . 26 Section 11.4. Disclosure . . . . . . . . . . . . . . . . 27 Section 11.5. Expenses and Taxes . . . . . . . . . . . . 27 Section 11.6. Entire Agreement . . . . . . . . . . . . . 27 Section 11.7. Amendment and Waiver . . . . . . . . . . . 27 Section 11.8. Binding Agreement and Successors . . . . . 27 Section 11.9. No Third Party Beneficiaries . . . . . . . 28 Section 11.10. Notices. . . . . . . . . . . . . . . . . . 28 Section 11.11. Further Assurances . . . . . . . . . . . . 29 Section 11.12. Article and Section Headings . . . . . . . 29 Section 11.13. Governing Law. . . . . . . . . . . . . . . 29 Section 11.14. Courts . . . . . . . . . . . . . . . . . . 29 Section 11.15. Construction . . . . . . . . . . . . . . . 29 Section 11.16. Counterparts . . . . . . . . . . . . . . . 29 Section 11.17. Attorney's Fees. . . . . . . . . . . . . . 29 SCHEDULES Schedule 1.18. Excluded Assets Schedule 1.19. Excluded Liabilities Schedule 3.1. Organization and Good Standing Schedule 3.5. Consents Schedule 3.6. Balance Sheet Schedule 3.7. Absence of Certain Changes Schedule 3.8. Litigation Schedule 3.9. Properties Schedule 3.10. Intellectual Property Schedule 3.11. Contracts Schedule 3.12. Employee Benefit Matters Schedule 3.13. Guarantees by Others Schedule 3.14. Tax Matters Schedule 3.15. Noncompliance Schedule 3.16. Permits Schedule 3.17. Environmental Matters Schedule 3.18. Insurance Schedule 3.19. Banks; Powers of Attorney Schedule 3.20. Brokerage Fees Schedule 5.2 Conduct of Business Exhibit A Balance Sheet Exhibit B Note to Seller Exhibit C Opinion of Bernard Corbett, Esq. Exhibit D Opinion of Semmes Bowen & Semmes BUSINESS COMBINATION AGREEMENT This BUSINESS COMBINATION AGREEMENT (the "Agreement") is made as of June 30, 1997, by and among A-COM, INC., a Virginia corporation with its principal office at 14720-K Flint Lee Road, Chantilly, Virginia 20151 (the "Corporation") and CHRISTOPHER CORBETT and MERRIE CORBETT, individuals, with a place of business at the same location (collectively hereinafter referred to as "Seller"), and ITP ACQUISITION CORP., and IT Partners, Inc., both Delaware corporations with their principal offices at 1006 Highland Drive, Silver Spring, Maryland 20910 ("Buyer"). W I T N E S S E T H: WHEREAS, Seller owns all of the issued and outstanding capital stock of the Corporation; WHEREAS, the Corporation is engaged in the design, manufacture and sale of products and services to the information technology industry; WHEREAS, Seller desires to convey to Buyer, and Buyer desires to acquire from Seller, in accordance with the terms and conditions of this Agreement as well as the terms and conditions of a certain Agreement and Plan of Merger to be executed at the Closing, all of the issued and outstanding shares of capital stock of the Corporation; NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: Section 1.1. Affiliate. "Affiliate" shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise. Section 1.2. Balance Sheet. "Balance Sheet" shall mean the audited statement of net assets and liabilities of the Corporation as of March 31, 1997. Section 1.3. Benefit Arrangements. "Benefit Arrangements" shall mean all profit sharing, life, health, hospitalization, savings, bonus, deferred compensation, incentive compensation, severance pay, disability, vacation, sick pay, holiday and fringe benefit plans, individual employment and severance contracts and other policies and practices of the Corporation, or any Affiliate thereof, providing employee or executive compensation or benefits to Employees or beneficiaries of Employees, other than Retirement Plans. Section 1.4. Buyer. "Buyer" shall have the meaning set forth above. Section 1.5. Buyer's Accountants. "Buyer's Accountants" shall mean the independent accounting firm of Ernst & Young, LLP. Section 1.6. Capital Liabilities. "Capital Liabilities" shall mean all outstanding debt of the Corporation in excess of the amount owed on loans collateralized by equipment and vehicles and accounts payable in the ordinary course of business. Section 1.7. Citibank Rate. "Citibank Rate" shall mean the rate announced from time to time by Citibank, N.A. as its prime commercial lending rate in New York City, New York (U.S.A.). Section 1.8. Closing. "Closing" shall mean the consummation of the events described in ARTICLE IX. Section 1.9. Closing Balance Sheet. "Closing Balance Sheet" shall mean the audited statement of net assets and liabilities of the Corporation as at the Closing Date as prepared and delivered in accordance with Section 2.4. Section 1.10. Closing Date. "Closing Date" shall mean the date on which the Closing shall occur. Section 1.11. Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.12. Confidentiality Agreement. "Confidentiality Agreement" shall mean the Confidentiality Agreement between the Buyer and the Seller. Section 1.13. Corporation. "Corporation" shall have the meaning set forth above. Section 1.14. Dispute Resolution Firm. "Dispute Resolution Firm" shall mean the independent accounting firm of Coopers & Lybrand LLP. Section 1.15. Employee. "Employee" shall mean each person who is a current employee, former employee, or retired employee of the Corporation or its predecessors. Section 1.16. Employee Benefit Plan. "Employee Benefit Plan" shall mean each employee benefit plan, as defined in Section 3(3) of ERISA, maintained or contributed to by the Corporation or any Affiliate thereof, which provides benefits to Employees, but excluding Multiemployer Plans. Section 1.17. ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974. as amended. Section 1.18. Excluded Assets. "Excluded Assets" shall mean the assets listed in Schedule 1.18, any consideration or proceeds received by the Corporation upon the disposition thereof, and any reserves established by Seller or the Corporation for any Excluded Liabilities. Section 1.19. Excluded Liabilities. "Excluded Liabilities" shall mean the liabilities listed in Schedule 1.19. Section 1.20. Exhibit. "Exhibit" shall mean an exhibit to this Agreement. Section 1.21. Final Closing Balance Sheet. "Final Closing Balance Sheet" shall have the meaning set forth in Section 2.4. Section 1.22. Final Net Asset Value. "Final Net Asset Value" shall mean the Net Asset Value as finally determined pursuant to Section 2.4(a), whether by failure of Seller to deliver notice of objection, by agreement of the parties, or by final determination of the Dispute Resolution Firm. Section 1.23. Financials Date. "Financials Date" shall mean March 31, 1997. Section 1.24. Guarantees. "Guarantees" shall mean any obligations, contingent or otherwise, of a Person in respect of any indebtedness, obligation or liability of another Person, including but not limited to direct or indirect guarantees, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, take-or-pay agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received. Section 1.25. H-S-R Act. "H-S-R Act" shall mean the Hart Scott-Rodino Antitrust Improvements Act of 1976, as amended. Section 1.26. Individual Returns. "Individual Returns" shall have the meaning set forth in Section 3.14. Section 1.27. Individual Taxes. "Individual Taxes" shall have the meaning set forth in Section 3.14. Section 1.28. Intellectual Property. "Intellectual Property" shall mean patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names. Section 1.29. IRS. "IRS" shall mean the Internal Revenue Service. Section 1.30. Material. "Material" (or "Materiality") when used with reference to information, a fact or circumstance, a course of action, a decision- making process, or other matter shall be limited to information, facts and circumstances, courses of action, decision-making process or other matters as to which there is a substantial likelihood that a reasonable purchaser of the Shares would attach importance in determining whether to purchase the Shares. Section 1.31. Material Adverse Effect. "Material Adverse Effect" when used with reference to a Person shall mean a material adverse effect on the business, properties (taken as a whole) or financial condition of the Person or Persons. Section 1.32. Material Contracts. "Material Contract" shall mean the contracts, agreements, commitments or other arrangements listed in Schedule 3.11. Section 1.33. MGAAP. "MGAAP" shall mean Generally Accepted Accounting Principles as in effect in the United States on the date of this Agreement, modified as provided in the notes to the Balance Sheet. Section 1.34. Net Asset Value. "Net Asset Value" shall mean total assets (not including any Excluded Assets) minus total liabilities (not including any Excluded Liabilities) as shown on the Proposed Closing Balance Sheet or the Final Closing Balance Sheet, as the case may be, each of which shall be prepared on a basis consistent with the Balance Sheet. Section 1.35. Offering Memorandum. "Offering Memorandum" shall mean the Confidential Memorandum prepared by Ernst & Young, LLP dated 1997. Section 1.36. PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation. Section 1.37. Person. "Person" shall mean any individual, corporation, unincorporated association, business trust, estate, partnership, trust, State, the United States or any other entity. Section 1.38. Proposed Closing Balance Sheet. "Proposed Closing Balance Sheet" shall have the meaning set forth in Section 2.4. Section 1.39. Purchase Price. "Purchase Price" shall have the meaning set forth in Section 2.3. Section 1.40. Retirement Plan. "Retirement Plan" shall mean any plan, fund, program or policy which provides retirement income to an Employee or results in a deferral of income by an Employee for periods extending to or beyond the termination of employment of the Employee by Seller and all Affiliates thereof, and pursuant to which the Corporation or an Affiliate thereof has paid benefits or contributed funds or has an obligation to pay benefits or contribute funds in respect of such Employee. Section 1.41. Schedule. "Schedule" shall mean a schedule to this Agreement. Section 1.42. Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.43. Seller. "Seller" shall have the meaning set forth above. Section 1.44. Seller's Accountants. "Seller's Accountants" shall mean the independent accounting firm of Richard P. Willis, P.C., 7661 Dowdy Drive, Richmond, Virginia 23231. Section 1.45. Senior Debt. "Senior Debt" shall mean the loan from Creditanstalt Bankverein in the principal amount of $10 million or such larger amount as the Buyer and Creditanstalt shall agree. Section 1.46. Shares. "Shares" shall mean all of the issued and outstanding shares of stock of the Corporation. Section 1.47 Subordinated Debt. "Subordinated Debt" shall mean the amount which the Buyer is obligated to the Seller as set forth Section 2.3 hereof. Section 1.48. Subsidiary. "Subsidiary," as it relates to any Person, shall mean a corporation more than 50% of whose outstanding securities the Person has the right, other than as affected by events of default, directly or indirectly, to vote for the election of directors. Section 1.49. Transaction Documents. "Transaction Documents" shall mean all other agreements, documents or instruments to be executed by a party hereto in connection with this Agreement. ARTICLE II PURCHASE AND SALE OF SHARES Section 2.1. Sale. On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, transfer, assign and deliver to Buyer or one or more of its designated subsidiaries, free and clear of any lien, security interest, charge, encumbrance or claim, and Buyer hereby agrees to purchase from Seller the Shares on the Closing Date. Section 2.2. Excluded Liabilities. Notwithstanding whether Buyer has acquired any responsibility for Excluded Liabilities by virtue of Buyer's purchase of the Shares, Seller shall retain, and Buyer shall not acquire responsibility for, the Excluded Liabilities. Section 2.3. Purchase Price and Allocation. The entire consideration to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and delivery to Buyer of the Shares shall be $10,048,093 (the "Purchase Price"), which shall be paid by Buyer to Seller at the time of Closing in the following manner: As to cash in the amount of $2,992,093.33 by wire transfer of immediately available funds into an account or accounts designated by Seller; as to Subordinated Debt, a promissory note in the amount of $2,226,000; and as to equity, a certificate evidencing ownership by the Seller of 929,603 shares of the common stock of IT Partners. Inc. Section 2.4. Adjustment of Purchase Price. (a) As promptly as practicable, and in any event not more than 90 days following the Closing Date, Buyer together with Buyer's Accountants shall prepare and deliver to Seller and Seller's Accountants the Proposed Closing Balance Sheet. The Proposed Closing Balance Sheet shall be prepared on a basis consistent with, and as provided in, the Balance Sheet (except that it shall include the net book value at Closing of all work-in-process and finished products), and shall be audited and accompanied by the report of Buyer's Accountants. Seller and Seller's Accountants shall have the right to observe the physical inventories to be conducted by, and to consult during reasonable business hours with appropriate personnel of, Buyer and Buyer's Accountants and to have access to, and to review and make copies of, the work papers of Buyer's Accountants with respect to such inventories and the preparation of the Proposed Closing Balance Sheet. (b) (i) Seller may dispute the Proposed Closing Balance Sheet prepared by Buyer and Buyer's Accountants by notifying Buyer and Buyer's Accountants in writing, setting forth in reasonable detail the amount(s) in dispute and the basis for such dispute, within 45 days of Seller's receipt of the Proposed Closing Balance Sheet. If Seller fails to deliver a notice of objections within such 45-day period, Seller shall be deemed to have accepted the Proposed Closing Date Balance Sheet and the Net Asset Value thereon. In the event the aggregate amounts in dispute are less than $100,000, the Closing Net Asset Value proposed by Buyer and Buyer's Accountants shall be adjusted by one-half of the dispute amount, and such resolution shall be final, binding and conclusive on Seller and Buyer. (ii) In the event the amounts in dispute exceed $100,000, Buyer's Accountants and Seller's Accountants shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amount(s) shall be final, binding and conclusive on Seller and Buyer. If Buyer's Accountants and Seller's Accountants do not resolve any such dispute within 15 days of the date of receipt by Buyer or Seller's written notice of dispute, Buyer and Seller shall, within five additional days, retain the Dispute Resolution Firm, which firm shall, within 30 days of each submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive on Seller and Buyer. Such resolution shall be within the range of amounts defined by the amount proposed by Buyer's Accountants and the amount proposed by Seller's Accountants as to each disputed item. The fees and disbursements of the Dispute Resolution Firm shall be borne by Buyer and Seller in the proportion that the aggregate amount of disputed items submitted to the Dispute Resolution Firm that is unsuccessfully disputed by each party (as finally determined by the Dispute Resolution Firm) bears to the total amount of the disputed items as submitted to the Independent Accounting Firm. After resolving the items in dispute, the Dispute Resolution Firm shall prepare and deliver to each of Seller and Buyer the Final Closing Balance Sheet and a certification of the Net Asset Value thereon. (c) In the event that the Final Net Asset Value is less than the Net Asset Value stated on the Balance Sheet, Seller shall pay to Buyer the difference plus interest thereon from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the Citibank Rate. In the event that the Final Net Asset Value is greater than the Net Asset Value sated on the Balance Sheet, Buyer shall pay to Seller the difference, plus interest on such amount from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the Citibank Rate. Such payment shall be made in immediately available funds not later than two business days after the determination of the Final Net Asset Value by wire transfer to a bank account designated by the party entitled to receive the payment. (d) To the extent that the Final Net Asset Value is different from the Net Asset Value reflected on the Balance Sheet, the allocation of the Purchase Price shall be increased or decreased, as the case may be, by such difference. Section 2.5 Board of Directors Membership. Immediately following Closing, Buyer shall take such corporate action as may be necessary to cause a designee of Seller to become a member of Buyer's Board of Directors (the "Board"), and, if necessary, to re-elect such designee, or another designee of Seller, to continue to serve on the Board until the later of twelve months from the date of Closing or the commencement of a public offering of Buyer's stock. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as follows: Section 3.1. Organization and Good Standing. The Corporation is duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia. The Corporation has full corporate power and authority to carry on its business as it is now being conducted. The Corporation is qualified as a foreign corporation in, and is in good standing under the laws of, each state set forth in Schedule 3.1, which are the only jurisdictions in which the failure of the Corporation to be so qualified would have a Material Adverse Effect on the Corporation. Section 3 .2. Capitalization. The authorized capital stock of the Corporation consists of 10,000 shares of common Stock, par value $10.00 per share, 500 shares of which are outstanding. Each of the outstanding Shares has been duly authorized and validly issued and is fully paid and nonassessable. No shares of capital stock of the Corporation are held in treasury, and there are no other issued or outstanding equity securities of the Corporation and no other issued or outstanding equity securities of the Corporation convertible at any time into equity securities of the Corporation. Neither Seller nor the Corporation is subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Corporation at any time under options, subscriptions, warrants, rights or any other obligations. Neither the execution and delivery of this Agreement and the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will (a) violate any of the provisions of the charter or by-laws of the Corporation, Seller, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, permit or license or any statute, rule or regulation of any governmental body, or any agreement, indenture, mortgage or instrument to which Seller, or the Corporation is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Seller. Section 3.3. Ownership of the Shares. Seller is the record and beneficial owner of the Shares, which are free and clear of any lien, security interest, charge, encumbrance or claim, and Seller has, or will have on the Closing Date, the right to transfer to Buyer complete and encumbered legal and equitable title to the Shares. Section 3.4. Execution and Effect of Agreement. Seller has the ability and authority to enter into and consummate this Agreement and the Transaction Documents, and the execution and delivery of such agreements and the consummation of the transactions completed hereby have, if and to the extent necessary, been duly authorized. This Agreement has been duly executed and delivered by the Seller, and constitutes a legal, valid and binding obligation of each such Person executing such Agreement subject to such applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principals of equity (whether applied by a court of law or of equity). Section 3.5. Consents. Except (a) for filings, consents, approvals and authorizations that the failure to obtain or make would not have a Material Adverse Effect on the Corporation, (b) as set forth in Schedule 3.7, or (c) for filings, consents, waivers, approvals or authorizations pursuant to the H-S-R Act, no consent, waiver, approval or authorization of any governmental authority or of any third party or notice to or filing with any governmental authority or any third party, on the part of Seller, or the Corporation is required in connection with the execution and delivery by Seller of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 3.6. Balance Sheet. Except as set forth in Schedule 3.6, the Balance Sheet was prepared in accordance with MGAAP and fairly presents the Corporation's financial condition as at the Financials Date. To Seller's knowledge, the Corporation has no Material liabilities or obligations, whether contingent or absolute, direct or indirect, matured or unmatured, which are not shown or provided for on the Balance Sheet or the notes thereto or set forth on Schedule 3.6, or any other Schedule to this Agreement, and Seller knows of no reasonable basis (as determined in Seller's reasonable judgment) for the assertion of any such liabilities or obligation. Section 3.7. Absence of Certain Changes. Since March 31, 1997, except as disclosed on Schedule 3.7 or as otherwise contemplated by this Agreement, there has not been: (a) any change in the assets, liabilities, business, properties or operations of the Corporation, other than changes (i) described in the Schedules or (ii) made or incurred in the ordinary course of business, which taken in the aggregate have had a Material Adverse Effect on the Corporation; (b) any dividend or other distribution declared, paid or made on or in respect of the capital stock of the Corporation; (c) any employment or other contract or commitment entered into by the Corporation, except in the ordinary course of business; (d) a cancellation of any claim of or debts owed to the Corporation, except in the ordinary course of business; (e) excluding any inventory or obsolete assets disposed of in the ordinary course of business, any sale, assignment, transfer or other disposition of (i) any Intellectual Property, the latest cost of which on the accounting records of the Corporation exceeds $2,500 or (ii) any other assets, the latest cost of which on the accounting records of the Corporation exceeds $2,500; (f) any capital expenditure, capital addition or capital improvement by the Corporation involving an amount in excess of $100,000; (g) any mortgage, lien, pledge, encumbrance or security interest created on any assets, tangible or intangible, except purchase money security interests created in the ordinary course of business; (h) any damage, destruction or loss (whether or not covered by insurance) which would have a Material Adverse Effect on the Corporation; (i) any labor disturbances which would have a Material Adverse Effect on the Corporation; or (j) to Seller's knowledge, any other event or condition which has had or, in the reasonable judgment of Seller, would likely have a Material Adverse Effect on the Corporation. Section 3.8. Litigation. Except as set forth in Schedule 3.8, Schedule 3.15 or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending or, to the knowledge of Seller, threatened by or before any court, any governmental or administrative agency or commission, or arbitrator, against Seller or the Corporation, in respect of this Agreement or any of the transactions contemplated hereby that would prevent a consummation of any of the transactions contemplated hereby. Except as set forth in Schedule 3.8, Schedule 3.15, or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending, or to the knowledge of Seller threatened, by or before any court, any governmental or administrative agency or commission, or arbitrator against or involving any of the businesses, properties, rights or assets of the Corporation or its Affiliates, employees or agents, which reasonably could be expected to have a Material Adverse Effect on the Corporation Section 3.9. Properties: Absence of Encumbrances. Schedule 3.9 sets forth a complete list of all real property leased, or used by the Corporation. With respect to leasehold interests: (a) the leases are in full force and effect and constitute valid and enforceable leasehold interests of the Corporation, free and clear of all liens, claims, security interests, encumbrances or mortgages created by Seller that would have a Material Adverse Effect on the Corporation, (b) the Corporation is not in default and has not received any written notice of default under any lease where there reasonably could be expected to be a Material Adverse Effect on the Corporation, and (c) to the knowledge of Seller there is no event which with notice or lapse of time or both would constitute such a default by the Corporation or by a lessor. Section 3.10. Intellectual Property. Schedule 3.10 sets forth a complete list of all Intellectual Property of the Corporation and all Affiliates on the date hereof and of all license agreements pursuant to which any such Intellectual Property is licensed (a) by or to the Corporation. The Corporation does not own, license or, to Seller's knowledge, use Intellectual Property Material to the continued operation of its business that is not listed on Schedule 3.10. Except as otherwise indicated in Schedule 3.10, the Corporation owns the Intellectual Property listed in Schedule 3.10 free and clear of any royalty, lien, encumbrance or charge. Notwithstanding anything to the contrary contained herein, Seller make no representation or warranty, and no such representation or warranty shall be implied, that any of the Intellectual Property is valid or enforceable. To the knowledge of Seller, except as set forth in Schedule 3.8 or Schedule 3.10, the Corporation has not received within the two year period immediately preceding the date of this Agreement any notice or claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by the Corporation or of any claim by any third party alleging any such infringement or conflict. To the knowledge of Seller, except as set forth in Schedule 3.8 or Schedule 3.10, during the two-year period immediately preceding the date of this Agreement the Corporation has not given any notice of infringement to any third party with respect to any of the Intellectual Property listed in Schedule 3.10. Section 3.11. Contracts. Schedule 3.11 sets forth a list of all contracts, agreements, commitments or other arrangements to which the Corporation is a party or by which the Corporation is obligated. Except for contracts, agreements, commitments or other arrangements set forth on Schedule 3.11 or other Schedules, as of the date of this Agreement the Corporation is not a party to or obligated by any: (a) Benefit Arrangements providing for aggregate payments of $2,500 or more in any 12 month period or any contract with employees, consultants or agents not terminable at will without cost or other liability by reason of such termination; (b) collective bargaining agreement; (c) guarantees by the Corporation of any obligation for the borrowing of $2,500 in the aggregate; (d) indentures, notes, mortgages, installment obligations, capital leases or other instruments relating to the borrowing of money in excess of $2,500 in the aggregate; (e) agreements, contracts or leases not listed on Schedule 3.11 (excluding open purchase orders and supply agreements entered into in the ordinary course of business) that involve the receipt or payment by the Corporation within one year of more than $100,000; and (f) executory contracts involving the acquisition or disposition of Material tangible or intangible assets other than in the ordinary course of business. Except as disclosed on Schedule 3.8 or as would not have a Material Adverse Effect on the Corporation, the Corporation is not in default under any Material Contract, has not waived any Material rights under any Material Contract and (to the knowledge of Seller) has no knowledge or notice that any party with whom it has a Material Contract is in default under any Material Contract. Section 3.12. Employees: Employee Benefit Matters. (a) Schedule 3.12 to this Agreement contains a true and complete list of all sales agents, consultants and employees of the Corporation (whether employed or engaged by written or oral agreement), their respective rates of compensation and any general or Material individual wage increase scheduled to take effect prior to Closing other than in the ordinary course of business. The Corporation has paid in full such employees, agents and consultants, or adequately reserved for, all wages, salaries, commissions, bonuses and other compensation for all services performed by them, except for such payments as are not yet due; and the Corporation is in compliance in all material respects with all laws and regulations respecting employment and employment practices, terms and conditions or employment, wages and hours, employee benefit plans and taxes (including withholding taxes) relating to employment. (b) Schedule 3.12 sets forth a list of all Employee Benefit Plans, all Material Benefit Arrangements, all Multiemployer Plans, and all Retirement Plans. Except as set forth in Schedule 3.12, with respect to each of such Employee Benefit Plans, Benefit Arrangements and Retirement Plans, Seller has delivered or made available to Buyer, as and if applicable, copies of (i) the text or formal plan document, including amendments and the summary plan description, (ii) the most recent IRS determination letter relating to the qualification of Retirement Plans under Section 401 of the Code and the related trust's qualification under Section 501 of the Code, (iii) the trust agreements, insurance contracts or other documents that constitute all or a part of the funding vehicle, (iv) in the case of all Employee Benefit Plans, the most recent annual reports (IRS Form 5500s), including the schedules thereto, and (v) the most recent actuarial reports or other financial reports. (c) Except as set forth in Schedule 3.12, (i) all Employee Benefit Plans comply in all Material respects with ERISA and the Code; (ii) the Corporation and its Affiliates have paid all contributions due under any of the Employee Benefit Plans and Multiemployer Plans to which they are required to contribute; and (iii) the Corporation and its Affiliates do not have minimum funding deficiencies or Multiemployer Plan withdrawa1 liabilities (including without limitation liabilities imposed by virtue of any other member of a controlled group having such liabilities imposed on it). (d) Except as set forth in Schedule 3.12, there are no Material actions, suits or claims pending or, to the knowledge of Seller, threatened against any Employee Benefit Plan, any Retirement Plan, any Benefit Arrangement, or any administrator or fiduciary thereof, other than benefit claims arisin inthe normal course of operation of such Employee Benefit Plans, Benefit Arrangements, or Retirement Plans. (e) To the knowledge of Seller, the Corporation has not engaged in any non-exempt "Prohibited Transaction, " as defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Employee Benefit Plan or with respect to any other parties-in-interest. Section 3.13. Guarantees by Others. Schedule 3.13 sets forth a complete list as of the date hereof of all Guarantees of Seller and its Affiliates for the benefit of Persons doing business with the Corporation. Section 3.14. Tax Matters. (a) Except as otherwise provided for herein, the Corporation has filed (including extensions) all federal, state, local, and other tax returns (the "Individual Returns") required to be filed by it under applicable law, including estimated tax returns and reports, and the Corporation has paid all required Material federal, state and local income and other applicable taxes, additions to such taxes, penalties and interest with respect thereto (the "Individual Taxes") due and payable on or before the date hereof (and will duly and timely pay all such amounts required to be paid between the date hereof and the Closing Date). The Corporation has not filed or paid federa1 or quarterly income tax estimates for its 1996 tax year, in reasonable anticipation that its tax liability as of the date of Closing will not exceed $20,000.00. The Corporation has paid, withheld or adequately provided for (or will adequately provide for) any and all Individual Taxes in respect of the conduct of its business or the ownership of its property and in respect of any transaction for which such taxes are due or would be due if the current tax period ended at the close of business on the Closing Date. (b) The Corporation has delivered or made available (or will make available prior to Closing) to Buyer copies of all tax returns filed by the Corporation for all tax years beginning with the year ended December 31, 1994, together with all tax basis fixed asset schedules and any information necessary to document differences between tax basis accounting and MGAAP accounting reflected on the Proposed Closing Balance Sheet and related income statements. (c) No Material proposed taxes, addition to tax, interest, or penalties have been asserted against the Corporation except those that have been paid in full, those that would not have a Material Adverse Effect on the Corporation, and those as set forth in Schedule 3.14. There are no agreements, waivers, or other arrangements providing for extensions of time in respect of the assessment or collection of any unpaid tax against the Corporation, except as set forth in Schedule 14. (d) No election or consent under Section 341(f) of the Code has been made or shall be made on or prior to the Closing Date by or on behalf of the Corporation. Section 3.15. Compliance with Law and Other Instruments; Regulatory Matters. Except as set forth on Schedule 3.15 or Schedule 3.16, (a) the business of the Corporation has been and is being conducted in accordance with all applicable laws, ordinances, rules and regulations of all authorities (exclusive of Environmental Laws as defined in and covered by Section 3.17 below), violation of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Corporation; and (b) the Corporation is not in violation of, or in default under, any term or provision of its charter documents or of any lien, indenture, mortgage, lease, agreement, instrument, commitment or other arrangement, or subject to any restriction of any kind or character, which reasonably could be expected to have a Material Adverse Effect on the Corporation. Seller has received no notice of any proposed public improvement which may involve any charge being levied or assessed against the real property of the Corporation that reasonably could be expected to have a Material Adverse Effect on the Corporation. Section 3.16. Permits. Schedule 3.16 sets forth a list of all governmental approvals, authorizations, licenses and permits of all governmental agencies necessary to the conduct of the business of the Corporation on the date hereof. Except as set forth in Schedule 3.16, all such approvals, authorizations, licenses and permits are in full force and effect and, to the knowledge of Seller, no proceedings to revoke them are pending or threatened and the Corporation is in compliance with the terms and conditions under which they were issued or granted. Section 3.17. Environmental Matters. Except as set forth on Schedule 3.17, the property leased by the Corporation and described in Section 3.9 ("Property") and its existing and, to the knowledge of Seller, prior uses comply and have at all times complied with, and the Corporation is not in violation of and has not violated, in connection with the ownership, use, maintenance or operation of its business, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances, codes, licenses or permits relating to the handling, manufacturing, treatment, storage, disposal, discharge, use or transportation of hazardous or toxic substances, materials or wastes, including without limitation the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Toxic Substances Control Act (collectively, "Environmental Laws"). To Seller's knowledge, except as set forth on Schedule 3.17, the Corporation has received no notice that any Environmental Laws or other federal, state or local statutes, orders, rules or regulations, ordinances or governmental policies require any work, repairs, construction or capital expenditures with respect to the Property. Section 3.18. Insurance. The Corporation is named as an insured with insurance carriers not related to or affiliated with Seller in amounts and against all risks normally insured against by Persons operating similar businesses in similar locations. Schedule 3.18 sets forth a list of the insurance coverage in effect as of the date of this Agreement. Section 3.19. Banks; Powers of Attorney. Schedule 3.19 sets forth as of the date of this Agreement: (a) the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Corporation maintains safe deposit boxes or accounts of any nature to which it has access, and the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto; and (b) the names of all Persons to whom the Corporation has granted a power of attorney. Section 3.20. Brokerage Fees. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon any agreements, written or oral, made by or on behalf of Seller or by or on behalf of any director, officer, employee, agent or Affiliate of Seller. In the event any claim is made for such fee or commission, the Seller agrees to indemnify Buyer and hold it harmless against all such claims. Section 3.21. Limitation of Representations and Warranties. Except as expressly set forth herein, neither Seller nor any of its Affiliates makes any representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: Section 4.1. Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has full corporate power and authority to carry on its businesses as they are now being conducted. Section 4.2. Investment Representation. Buyer is aware that the Shares are not registered under the Securities Act. Buyer possesses such knowledge and experience in business matters that it is capable of evaluating the merits and risks of its investments hereunder. Buyer is acquiring the Shares for its own account, for investment purposes only and not with a view to the distribution thereof. Section 4.3. Execution and Effect of Agreement. Buyer has the corporate power and authority to enter into this Agreement and the Transaction Documents, and the execution and delivery of such agreements and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Each of the Transaction Documents, upon its execution and delivery by Buyer, will constitute a legal, valid and binding obligation of each such Person executing such Agreement, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Section 4.4. Restrictions. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) violate any of the provisions of the charter or by-laws of Buyer, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Buyer is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of the foregoing clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Buyer. Section 4.5. No Lawsuits; Consents. There is no lawsuit, proceeding or investigation pending or, to the knowledge of Buyer threatened, against Buyer the effect of which would prevent the consummation of any of the transactions contemplated hereby. Except (a) for filings, consents, waivers, approvals and authorizations as to which the failure to obtain or make would not have a Material Adverse Effect on the Buyer, and (b) for filings, consents, waivers, approvals and authorizations pursuant to the H-S-R Act, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of the Buyer is required in connection with the execution and delivery of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 4.6. Tax Consequences. The income tax consequences, to the Seller, if any, of the transactions contemplated by this Agreement will be no less favorable than the income tax consequences of any alternative method of completing the transactions contemplated by this Agreement previously considered by A-COM and IT Partners. Section 4.7. Limitation of Representations and Warranties. Except as expressly set forth herein, Buyer makes no representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. ARTICLE V COVENANTS AND AGREEMENTS OF THE SELLER Seller covenants and agrees for the benefit of Buyer as follows: Section 5.1. Corporate Action. Seller shall take, and shall cause the Corporation to take, all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Seller shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 5.2. Conduct of Business to Closing. Except as contemplated by this Agreement, Seller shall not cause the business of the Corporation to be conducted other than in the ordinary course. Except as contemplated by or set forth in this Agreement or the Schedules, including without limitation Schedule 5.2, or as consented to in writing by Buyer (which consent shall not be unreasonably withheld), Seller shall act, or cause the Corporation to act, as follows: (a) The Corporation will not adopt any Material change in any method of accounting or accounting practice, except as contemplated or required by MGAAP or Schedule 3.6; (b) The Corporation will not amend its charter or by laws (or other similar organizational documents) or the charter or by-laws of any Subsidiary; (c) Except (i) in the ordinary course of business, (ii) as required by law, (iii) as required or appropriate to maintain the qualification of any Employee Benefit Plan or Benefit Arrangement under applicable tax laws or under ERISA, (iv) as required by existing Employee Benefit Plans, Retirement Plans, or Benefit Arrangements, or (v) as otherwise contemplated by this Agreement, the Schedules, or the Exhibits, neither the Corporation nor any Affiliate will enter into or amend any Employee Benefit Plan or Benefit Arrangement covering Employees, or give any general or Material individual wage or salary increase to its Employees; (d) The Corporation shall not enter into any collective bargaining agreement covering Employees; (e) Except (i) in the ordinary course of business, (ii) as otherwise contemplated by this Agreement or the Schedules, or (iii) in connection with the transfer of any of the Excluded Assets, the Corporation will not sell, mortgage, pledge, or otherwise dispose of any substantial assets or properties; (f) Except as contemplated by this Agreement or the Schedules, the Corporation will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (g) Except as contemplated by this Agreement or the Schedules, the Corporation will not (i) authorize for issuance, issue or sell any additional shares of its or its Subsidiaries' capital stock or any securities or obligations convertible into shares of its Subsdiaries' capital stock or issue or grant any option, warrant or other right to purchase any shares of its capital stock, or (ii) declare or pay any dividend or other distribution on or in respect of its capita1 stock: (h) The Corporation will maintain its existing insurance policies, or comparable coverage, in full force and effect; (i) Except in the ordinary course of business or as contemplated by this Agreement or the Schedules, the Corporation will not incur or agree to incur long-term debt for borrowed money; and (j) The Corporation shall not make any capital expenditure, capital addition, or capital improvement exceeding $25,000. Section 5.3. Consents. (a) Seller shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, it being understood that neither Seller nor any of its Affiliates shall be under any obligation to pay money to any third party (other than fees imposed by statute or regulation to obtain governmental consents or approvals) as a condition to receiving any such consents, waivers or authorizations and (ii) cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. Section 5.4. Covenant Against Competition. (a) Neither the Seller nor any Affiliate, for so long as it is an Affiliate, shall, directly or indirectly, for a period of twelve months after the Closing (the "Period"), engage in the Information Services Business within a 500-mile radius of the principal place of business of Buyer. (b) Except as may be required by law or in the bona fide prosecution of its Rights under this Agreement or any Transaction Document, after Closing neither Seller now its Affiliate shall use or disclose any confidential information principally concerning the Information Services Business. (c) Seller acknowledges and agree that it would be difficult to fully compensate Buyer for damages resulting from the breach or threatened breach of the foregoing provisions of this Section 5.4 and, accordingly that Buyer shall be entitled to temporary and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce such provisions upon proving that it has suffered or that there is a substantial probability that it will suffer irreparable harm and without the necessity of posting any bond or other understanding in connection therewith. This provision with respect to injunctive relief shall not, however, diminish Buyer's right to claim and recover damages. (d) The provisions of this Section 5.4 are severable and if any one or more of them may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall nevertheless be binding and enforceable. For purposes of Section 5.4(a), each of clauses (a) through (d) shall be considered a separate covenant such that if the geographic scope of any such clause shall be determined by a court to be invalid, that clause shall be severed and the remaining clauses shall remain in full force and effect. Section 5.5. Capital Liabilities. No later than Closing, Seller shall cause such Capital Liabilities, as may exist prior to or at Closing, including all interest accrued thereon, to be fully-satisfied or to be specifically provided for on Schedule 2.22. Section 5.6. Access to Information and Cooperation. (a) Subsequent to the date of this Agreement, Seller shall give Buyer, its counsel, and its consultants full and complete access, upon reasonable notice during normal business hours, to all records and affairs of the Corporation within their possession and will provide copies of such information concerning the Corporation as Buyer may reasonably request for any proper purpose, including without limitation in connection with the preparation of any tax returns or financial statements or in connection with any judicial, quasijudicial. administrative, tax audit or arbitration proceeding. (b) Seller shall at its expense cooperate fully with the Buyer in the defense or pursuit of any claim or action which relates to occurrences involving the business of the Corporation prior to the Closing Date that does not relate to an Excluded Asset. Section 5.7. Public Statements. Except for the limited disclosure by Buyer and Seller to certain third parties of certain aspects of the transaction contemplated by this Agreement, Seller shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in public dissemination thereof without the prior written consent of Buyer (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Seller, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Seller has received such counsel's opinion, (i) Seller shall advise Buyer of the opinion and (ii) at Buyer's request, Seller shall provide a copy to Buyer, and further provided that Seller shall be permitted to discloseto Employees, and upon Buyer's request to give Buyer the opportunity to make a joint statement with Seller to Employees, concerning the terms of Benefit Arrangements and Employee Benefit Plans available to Employees following Closing. ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Buyer covenants and agrees for the benefit of Seller as follows Section 6.1. Corporate Action. Buyer shall take all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Buyer shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 6.2. Public Statements. Buyer shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in public dissemination thereof without the prior written consent of Seller (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Buyer, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Buyer has received such counsel's opinion, (i) Buyer shall advise Seller of the opinion and (ii) at Seller's request, Buyer shall provide a copy to Seller. Section 6.3. Consents. (a) Buyer shall promptly make any and all filings that are or may be required under the H-S-R Act and shall cooperate with Seller in connection with similar filings by Seller. Buyer shall cooperate and use reasonable efforts to ensure that any pre-acquisition waiting period required by the H-S-R Act expires or is otherwise terminated, and shall comply promptly with any requests made pursuant to the H-S-R Act or the regulations thereunder. (b) Buyer shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, provided that Buyer shall not be under any obligation to pay money to any third party as a condition to receiving any such consents, waivers or authorizations, and (ii) cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Section 6.4. Certain Employee Benefit Matters. (a) Commencing upon the Closing Date, Buyer shall cause the Corporation to continue to employ each Employee who is an Employee on the Closing Date upon the same terms and conditions of employment as pertained to each Employee on the day immediately preceding the Closing Date and as are specifically described in the Schedules to this Agreement, provided that this undertaking shall in no way diminish the Corporation's existing Rights to lay off employees or to terminate employees on account of unacceptable performance or otherwise in accordance with the terms of any contracts of employment. If any Employee is laid off or on leave on the Closing Date, Buyer shall cause the Corporation to recall or reinstate such Employee in accordance with the layoff or leave of absence policy of the Corporation that is in effect on the date of this Agreement and is specifically described in the Schedules. Buyer shall take all reasonable action required or appropriate to cause the Corporation to fulfill all obligations of the employer under all Benefit Arrangements, Employee Benefit Plans, Multiemployer Plans, and Retirement Plans as of the Closing Date (including without limitation severance payments or benefits that have accrued, or that accrue or inure, on or after the Closing Date or that inure after the date of this Agreement and prior to the Closing Date as a result of action taken by Seller with consent of Buyer) which are specifically described on the Schedules, except as may be required otherwise by law. (b) On or prior to the Closing, the Buyer shall have adopted the ITP 1997 long-term incentive plan (see "Incentive Plan"), a copy of which has been provided to Seller. The Buyer has reserved a total of 240,000 shares of common stock of the Buyer for issuance to the Corporation's employees pursuant to the exercise of options that are to be granted pursuant to the Incentive Plan. Section 6.5. Preservation of and Access to Certain Information and Cooperation After Closing. (a) Buyer shall, and from and after the Closing Date shall cause the Corporation and its Affiliates, to preserve all books and records of the Corporation until Seller notifies Buyer that all statutes of limitations relating to tax periods to which such records relate have expired, and thereafter not to destroy or dispose of such records without notice to Seller offering it the Agt. to copy such records. Except as prohibited or limited by law or regulation, Buyer shall, and shall cause the Corporation from and after the Closing Date to, give Seller and Seller's employees, accountants, counsel, and advisors, reasonable access upon reasonable notice and for proper business purposes during normal business hours, to all officers, employees, offices, properties, agreements, books, records and affairs of the Corporation, in a manner that does not unreasonably interfere with the normal conduct of its business. Buyer shall, and shall cause the Corporation to, prepare and transmit such financial reports in accordance with past practices and procedures and on a timely basis as may be necessary for Seller or its Affiliates to prepare any Consolidated Tax Return, and ensure that Seller and its authorized representatives shall be free, during the period referred to in the first sentence of this Section, to make copies of such books, records, files and data concerning the Corporation for the following purposes: (i) the review of the Proposed Closing Balance Sheet and the resolution of any disputes with respect to the Proposed Closing Balance Sheet, (ii) the preparation of any tax returns for the Affiliated Group, (iii) or in anticipation of any judicial, quasijudicial, administrative, tax audit, or arbitration proceeding initiated by or against third parties and relating to the Corporation, and (iv) in connection with any claim relating to Excluded Assets or Excluded Liabilities. Except as may be required by law or in the bona fide prosecution of its rights under this Agreement or any Transaction Document and except as specifically provided above, Seller shall not use or disclose any such information. (b) Buyer shall after Closing the Corporation, at Seller's expense to, cooperate fully and to such extent as is reasonable under the circumstances with Seller in the defense of pursuit of any claim or action that relates to an Excluded Liability or an Excluded Asset. Section 6.6. Nondisposition of Shares. Buyer shall not, and shall not permit any of their Affiliates to, sell, transfer, offer for sale, pledge, hypothecate, or otherwise dispose of the Shares except pursuant to a valid registration under the Securities Act, unless an exemption from registration under the Securities Act is available. ARTICLE VII CONDITIONS OF OBLIGATIONS OF BUYER The obligations of Buyer to consummate the purchase of the Shares on the Closing Date and to perform their other covenants and agreements in accordance with-the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Buyer, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to Buyer as the result of the failure to satisfy such condition: Section 7.1. Representations and Warranties True. Except as otherwise permitted, contemplated, or limited by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Seller contained in ARTICLE III that is limited by Materiality shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date, and (b) each of the representations and warranties that is not so limited shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date. Section 7.2. Covenants and Agreements--No Default. Seller shall not be in default in respect of any obligation under this Agreement and Seller shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by them prior to or as of the Closing Date. Section 7.3. Officer's Certificates. Seller shall have furnished Buyer with a certificate signed by a corporate officer confirming the satisfaction of the conditions set forth in Section 7.1 and Section 7.2. Section 7.4. No Material Adverse Change. Except as permitted or contemplated by this Agreement or any Schedule, or disclosed in the Balance Sheet, since the Financials Date the Corporation shall not have suffered an adverse change in its business or financial condition that could reasonably be expected to have a Material Adverse Effect on the Corporation. Section 7.5. Consents. Seller shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement other than those that are not Material or set forth in Schedule 3.5, and all applicable waiting periods in respect of the transactions contemplated by this Agreement under the H-S-R Act shall have expired or otherwise terminated, it being understood that (a) the Seller shall not be under any obligation to pay money to any third party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations, and (b) Seller shall use reasonable efforts to cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. In the event Seller is unable to obtain any such consents, the condition contained in this Section 7.5 shall be deemed satisfied if Seller provides to Buyer and, other than as to matters identified on Schedule 3.11, in a manner and form satisfactory to Buyer in its sole discretion, at the Closing the economic equivalent of any rights that would have inured to the Buyer had such consents been obtained. Buyer shall have obtained all third-party consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 4.5. Section 7.6. Transaction Documents. Seller shall have provided Buyer with all of the documents required by Section 10.2 to be delivered at Closing by Seller. Section 7.7. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or any Material Transaction Document or against or involving the Corporation where the outcome might reasonably be expected to have a Material Adverse Effect on the Corporation. ARTICLE VIII CONDITIONS OF OBLIGATIONS OF SELLER The obligation of Seller to consummate the sale of the Shares on the Closing Date and to perform their other covenants and agreements in accordance with the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Seller, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to Seller or its Affiliates as the result of the failure to satisfy such condition: Section 8.1 Representations and Warranties True. Except as otherwise permitted or contemplated by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Buyer contained in ARTICLE IV that is limited by Materiality shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date and (b) each of the representations and warranties that is not so limited shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date. Section 8.2. Covenants and Agreements--No Default. Buyer shall not be in default in respect of any obligation under this Agreement and Buyer shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by Buyer prior to or as of the Closing Date. Section 8.3. Officer's Certificates. Buyer shall have furnished Seller with a certificate signed by a corporate officer confirming the satisfaction of the conditions set forth in Sections 8.1 and 8.2. Section 8.4 Consents. Buyer shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 4.5, and all applicable waiting periods in respect of the transactions contemplated by this Agreement under the H-S-R Act shall have expired or otherwise terminated, it being understood that (a) Buyer shall not be under any obligation to pay money to any third-party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations and (b) Buyer shall use reasonable efforts to cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Seller shall have obtained all third-party and governmental consents, waivers, authorizations, and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 3.5 or are set forth in Schedule 3.5. Section 8.5. Transaction Documents. Buyer shall have provided Seller with all of the documents required by Section 10.3 to be delivered at Closing by Buyer. Section 8.6. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or the Transaction Documents. ARTICLE IX (INTENTIONALLY OMITTED) ARTICLE X CLOSING Section 10.1. Closing. The Closing shall take place at the offices of Semmes, Bowen & Semmes, 250 West Pratt Street, Baltimore, Maryland 21201, on June 30, 1997 at 2:00 p.m., or at such other place and at such other time and date as may be mutually agreed upon in writing by Buyer and Seller, only upon fulfillment of (a) all the conditions set forth in ARTICLE VII that have not been waived by Buyer, and (b) all the conditions set forth in ARTICLE VIII that have not been waived by Seller. If such conditions have not been fulfilled or waived by such date, the Closing shall take place within five business days after fulfillment or waiver of all such conditions but in no event later than June 30, 1997 unless otherwise mutually agreed to in writing by the Buyer and the Seller. All proceedings to be taken and all documents to be executed and delivered by Seller in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Buyer and its counsel. All proceedings to be taken and all documents to be executed and delivered by Buyer in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Seller and its counsel. All proceedings to be taken and all documents to be executed and delivered at the Closing shall be deemed to have been taken and executed simultaneously, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed or delivered. Notwithstanding the foregoing, this Agreement may be terminated by a party not in default hereunder at any time after June 30, 1997 (or such later date as may have been agreed to by the parties) by written notice to the other Party. Section 10.2. Documents to be Delivered by Seller. At the Closing, Seller shall deliver, or shall cause to be delivered, to Buyer the following: (a) Certificates representing the Shares, which certificates shall be duly endorsed in blank or, in lieu thereof, shall have affixed thereto stock powers executed in blank and in proper form for transfer; (b) Employment Contracts for certain employees of the Corporation. (c) An opinion of Bernard Corbett, Esq. counsel for the Seller, dated the Closing Date, substantially in the form attached hereto as Exhibit B; (d) Certificates of a Vice President, the Secretary or an Assistant Secretary of Seller, dated the Closing Date, setting forth the resolutions of the Board of Directors of Seller authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and certifying that such resolutions have not been amended or rescinded and are in full force and effect; (e) A good standing certificate and a copy of the Corporation's charter, certified as of a date reasonably close to the Closing Date; (f) The certificates contemplated by Section 7.3; and (g) Such other documents, instruments or agreements as may be reasonably requested by Buyer to effectuate the transactions contemplated by this Agreement. Section 10.3. Documents to be Delivered by Buyer. At the closing, Buyer shall deliver, or cause to be delivered, to Seller the following: (a) A wire transfer of funds to the account designated by Seller in an amount equal to the total cash portion of the Purchase Price, as provided in Section 2.3; (b) A note in favor of the Seller as provided for in Section 2.3. (c) A certificate representing 929,603 shares of the common stock of IT Partners, Inc. (d) An opinion of Semmes Bowen & Semmes, counsel for Buyer, dated the Closing Date, substantially in the form attached hereto as Exhibit F; (e) Certificates of the Secretary or an Assistant Secretary of Buyer, dated the Closing Date, setting forth copies of the resolutions of the Board of Directors of Buyer, authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and certifying that such resolutions have not been amended or rescinded and are in full force and effect; (f) The certificates contemplated by Section 8.3; and (g) Such other documents, instruments or agreements as may be reasonably requested by Seller to effectuate the transactions contemplated by this Agreement. ARTICLE XI MISCELLANEOUS Section 11.1. Survival of Representations, Warranties, Covenants and Agreements. Except as otherwise expressly provided in this Agreement, all covenants and all representations and warranties made by the parties in this Agreement (including statements contained in any Schedule or certificate or other instrument delivered by or on behalf of a party to this Agreement) shall survive the execution of this Agreement and the Closing and any investigations, examinations or audits made by or on behalf of the parties, provided that representations and warranties shall survive only until the applicable "Expiration Date" as follows: (a) The Expiration Date for the representations and warranties made in Section 3.16 shall be the date on which all applicable tax statutes of limitation have expired; and (b) The Expiration Date for all other representations and warranties made in this Agreement shall be the third anniversary of the Closing Date. On the applicable Expiration Date, the associated representations and warranties shall have no further force or effect and all liabilities of the parties thereunder shall be extinguished, provided that if prior to the Expiration Date a party has delivered to the other party a notice asserting a good faith claim for breach of representation and warranty, that specific claim shall survive and be actionable after the Expiration Date. Section 11.2. Indemnification. (a) Seller shall hold harmless and indemnify Buyer from and against all claims, actions, damages, liabilities or losses (including court costs and attorneys fees) (collectively, "Losses") arising out of: (i) the breach by Seller of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement; (ii) discharge, or resistance to payment or discharge, of any Excluded Liabilities; and (iii) products liability claims asserted against or paid by the Corporation (after having used reasonable and appropriate efforts to avoid or reduce such payments) in respect of the work performed by and the products of the Company, but only where such claims are asserted within 18 months after the Closing Date, provided, however, that such indemnification shall be limited to and shall not exceed the coverage provided by Seller's existing insurance policies covering product liability. (b) Buyer shall hold harmless and indemnify Seller from and against all Losses arising out of: (i) the breach by Buyer of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement; (ii) the breach by Buyer or, after Closing, the Corporation of any agreements with any third parties; (iii) actions wrongfully taken with respect to the Corporation by Buyer or its Affiliates, or by the Corporation after Closing; and (iv) actions taken with respect to the Corporation by Seller prior to Closing, including, but not necessarily being limited to, certain personal obligations of the Seller as to motor vehicle loans, letters of credit and performance and payment bonds with USF&G and others, including any and all costs or expenses related in any way to such guarantees or obligations, the intent of the parties being to take all steps as may be reasonably necessary to relieve the Seller of these obligations in as timely a manner as possible after the Closing as amended by the Joinder Agreement executed by the shareholders of even date. (c) For purposes of this Section 11.2, any Losses incurred by the Corporation shall be deemed to have been incurred by Buyer. (d) After the Closing, Seller shall not be entitled to contribution from, or recovery against, the Corporation with respect to any liability of Seller which may arise under this Section 11.2. (e) Consummation of the transactions contemplated by this Agreement and the Transaction Documents shall not be deemed to be a waiver of any right or remedy of a party, nor shall this Section 11.2 or any other provision of this Agreement be deemed to be a waiver of any ground of defense by a party. Section 11.3. Disclaimer of Other Representations and Warranties by Seller. The parties hereto acknowledge and agree that Seller does not make; and has not made, any representations or warranties relating to Seller, the Corporation, or any of Seller's Affiliates or any of the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in this Agreement. Without limiting the generality of the disclaimer set forth in the preceding sentence, Seller does not make, has not made and shall not be deemed to have made any representations or warranties in the Offering Memorandum, in any presentation relating to the businesses of the Corporation given in connection with the transactions contemplated by this Agreement, in any filing made by or on behalf of the Corporation or its Affiliates with any governmental agency, or in any other information provided to or made available to Buyer and not included in the Schedules to this Agreement, and no statement contained in the Offering Memorandum or made or contained in any such presentation, filing, or information shall be deemed a representation or warranty hereunder or otherwise. No person has been authorized by Seller, its Affiliates or the Corporation to make any representation or warranty in respect of Seller, its Affiliates or the Corporation in connection with the transactions contemplated by this Agreement. Section 11.4. Disclosure. Notwithstanding any provision to the contrary contained in this Agreement, the Exhibits or the Schedules, any information disclosed in one Schedule shall be deemed to be disclosed in all Schedules. Certain information set forth in the Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment or agreement that the information is required to be disclosed in connection with the representations and warranties made in this Agreement or that the information is Material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is Material. Section 11.5. Expenses and Taxes. All legal, accounting and other costs and fees incurred by the Corporation, Seller in connection with the transactions contemplated by this Agreement shall be borne and paid for by Seller. All legal, accounting and other costs and fees incurred by Buyer in connection with the transactions contemplated by this Agreement and all taxes (other than value added taxes or taxes on, relating to or measured by income or gains), stamp duty, notarial, registration and recording fees and similar taxes resulting from or relating to the transfer of any of the Shares to Buyer or any party designated by Buyer shall be borne by Buyer. Section 11.6. Entire Agreement. This Agreement, the Schedules, and the Exhibits constitute the entire agreement and understanding between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement (including without limitation the Offering Memorandum), other than the Confidentiality Agreement, are merged herein and are superseded and can celled by this Agreement. Other than as expressly set forth in this Agreement and the Schedules and Exhibits, no representations, warranties, covenants, agreements or conditions, express or implied, whether by statute or other wise, have been made by the parties hereto. Section 11.7. Amendment and Waiver. This Agreement may be amended, modified, supplemented or changed in whole or in part only by an agreement in writing making specific reference to this Agreement and executed by each of the parties hereto. Any of the terms and conditions of this Agreement may be waived in whole or in part, but only by an agreement in writing making specific reference to this Agreement and executed by the party that is entitled to the benefit thereof. Section 11.8. Binding Agreement and Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that prior to the consummation of this Agreement the Rights of the parties hereunder may not be assigned, and provided that the obligations of the parties hereunder may not be delegated, in whole or in part, without the prior written consent of the other party hereto. Section 11.9. No Third Party Beneficiaries. Nothing in this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies. Section 11.10. Notices. Any notice, request, instruction or other document or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to be given upon (i) delivery in person,(ii) five days after being deposited in the mail, postage prepaid, for mailing by certified or registered mail, (iii) one day after being deposited with an overnight courier, charges prepaid, or (iv) when transmitted by facsimile, with a copy simultaneously sent as provided in clauses (ii) and (iii), in every case as follows: If to Buyer, delivered or mailed to: IT Partners, Inc. 1006 Highland Drive Silver Spring, Maryland 20910 Attention: Daniel J. Klein with a copy delivered or mailed by the same method to: Kevin M. O'Connell, Esquire Semmes, Bowen & Semmes 250 West Pratt Street Baltimore, Maryland 21201 If to Seller, delivered or mailed to: Christopher Corbett, President A-COM, INC. 14720-K Flint Lee Road Chantilly, VA 20151 Attention: Christopher Corbett with a copy delivered or mailed by the same method to: Bernard Corbett, Esq. 123 South Royal Street Alexandria, VA 22314 or to such other address or addresses as may be specified in writing at any time or from time to time by either party to the other party hereto. Section 11.11. Further Assurances. The parties hereto each agree to execute, make, acknowledge, and deliver such instruments, agreements and other documents as may be reasonably required to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Section 11.12. Article and Section Headings. The Article, Exhibit and Section headings contained in this Agreement, the Exhibits and the Schedules are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement, the Exhibits, or the Schedules or any of their terms and conditions. Section 11.13. Governing Law. This Agreement shall be construed and enforced in accordance with and shall be governed by the laws of the State of Maryland, without regard to its conflict of law provisions and principles. Section 11.14. Courts. Any dispute arising from the interpretation or operation of this Agreement shall be resolved in the courts of the State of Maryland, and the parties hereby consent to and elect, and waive any objection to, such jurisdiction in the event of litigation hereunder. Section 11.15. Construction. As used in this Agreement, any reference to the masculine, feminine or neuter gender shall-include all genders, the plural shall include the singular, and the singular shall include the plural. With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties hereto understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto. Section 11.16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Section 11.17. Attorneys' Fees. Should legal proceedings be instituted to enforce the provisions of this Agreement or any Transaction Document, the prevailing party shall be entitled to costs of suit, including attorneys' fees actually incurred, from the unsuccessful party. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the day IT PARTNERS, INC. By: ______________________________ ---------------------------- Daniel J. Klein ITP ACQUISITION CORP. By:____________________________ ------------------------------ Daniel J. Klein ------------------------------ Christopher Corbett ------------------------------- Merrie Corbett EX-10.4 13 CNS BUSINESS COMBINATION AGREEMENT BUSINESS COMBINATION AGREEMENT Dated as of May 27, 1997 By and Among IT PARTNERS INC. and C.N.S., INC. and STANLEY NICE and JOHN CLEMENT TABLE OF CONTENTS DEFINITIONS PAGE Section 1.1. Affiliate . . . . . . . . . . . . . . . . . . . 10 Section 1.2. Balance Sheet . . . . . . . . . . . . . . . . . 10 Section 1.3. Benefit Arrangements. . . . . . . . . . . . . . 11 Section 1.4. Buyer . . . . . . . . . . . . . . . . . . . . . 11 Section 1.5. Buyer's Accountants . . . . . . . . . . . . . . 11 Section 1.6. Capital Liabilities . . . . . . . . . . . . . . 11 Section 1.7. Citibank Rate . . . . . . . . . . . . . . . . . 11 Section 1.8. Closing . . . . . . . . . . . . . . . . . . . . 11 Section 1.9. Closing Balance Sheet . . . . . . . . . . . . . 11 Section 1.10. Closing Date. . . . . . . . . . . . . . . . . . 11 Section 1.11. Code. . . . . . . . . . . . . . . . . . . . . . 11 Section 1.12. Confidentiality Agreement . . . . . . . . . . . 11 Section 1.13. Corporation . . . . . . . . . . . . . . . . . . 11 Section 1.14. Dispute Resolution Firm . . . . . . . . . . . . 11 Section 1.15. Employee. . . . . . . . . . . . . . . . . . . . 11 Section 1.16. Employee Benefit Plan . . . . . . . . . . . . . 12 Section 1.17. ERISA . . . . . . . . . . . . . . . . . . . . . 12 Section 1.18. Excluded Assets . . . . . . . . . . . . . . . . 12 Section 1.19. Excluded Liabilities. . . . . . . . . . . . . . 12 Section 1.20. Exhibit . . . . . . . . . . . . . . . . . . . . 12 Section 1.21. Final Closing Balance Sheet . . . . . . . . . . 12 Section 1.22. Final Net Asset Value . . . . . . . . . . . . . 12 Section 1.23. Financials Date . . . . . . . . . . . . . . . . 12 Section 1.24. Guarantees. . . . . . . . . . . . . . . . . . . 12 Section 1.25. H-S-R Act . . . . . . . . . . . . . . . . . . . 12 Section 1.26. Individual Returns. . . . . . . . . . . . . . . 12 Section 1.27. Individual Taxes. . . . . . . . . . . . . . . . 13 Section 1.28. Intellectual Property . . . . . . . . . . . . . 13 Section 1.29. IRS . . . . . . . . . . . . . . . . . . . . . . 13 Section 1.30. Material. . . . . . . . . . . . . . . . . . . . 13 Section 1.31. Material Adverse Effect . . . . . . . . . . . . 13 Section 1.32. Material Contracts. . . . . . . . . . . . . . . 13 Section 1.33. MGAAP . . . . . . . . . . . . . . . . . . . . . 13 Section 1.34. Net Asset Value . . . . . . . . . . . . . . . . 13 Section 1.35. Offering Memorandum . . . . . . . . . . . . . . 13 Section 1.36. PBGC. . . . . . . . . . . . . . . . . . . . . . 13 Section 1.37. Person. . . . . . . . . . . . . . . . . . . . . 13 Section 1.38. Proposed Closing Balance Sheet. . . . . . . . . 14 Section 1.39. Purchase Price. . . . . . . . . . . . . . . . . 14 Section 1.40. Retirement Plan . . . . . . . . . . . . . . . . 14 Section 1 41. Schedule. . . . . . . . . . . . . . . . . . . . 14 Section 1.42. Securities Act. . . . . . . . . . . . . . . . . 14 Section 1.43. Seller. . . . . . . . . . . . . . . . . . . . . 14 Section 1.44. Seller's Accountants. . . . . . . . . . . . . . 14 Section 1.45. Senior Debt . . . . . . . . . . . . . . . . . . 14 Section 1.46. Shares. . . . . . . . . . . . . . . . . . . . . 14 Section 1.47. Subordinated Debt . . . . . . . . . . . . . . . 14 Section 1.48. Subsidiary. . . . . . . . . . . . . . . . . . . 14 Section 1.49. Transaction Documents . . . . . . . . . . . . 14 ARTICLE II. PURCHASE AND SALE OF SHARES Section 2.1 Sale. . . . . . . . . . . . . . . . . . . . . . 15 Section 2.2. Purchase Price and Allocation . . . . . . . . . 15 DEFINITIONS PAGE Section 2.3. Adjustment of Purchase Price. . . . . . . . . . 15 Section 2.5 Board of Directors Membership; Amendments to Buyer's By-laws. . . . . . . . . .17 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER Section 3.1. Organization and Good Standing. . . . . . . . . 17 Section 3.2. Capitalization. . . . . . . . . . . . . . . . . 17 Section 3.3 Ownership of the Shares . . . . . . . . . . . . 18 Section 3.4 Execution and Effect of Agreement . . . . . . . 18 Section 3.5. Consents. . . . . . . . . . . . . . . . . . . . 18 Section 3.6. Balance Sheet . . . . . . . . . . . . . . . . . 18 Section 3.7. Absence of Certain Changes. . . . . . . . . . . 19 Section 3.8. Litigation. . . . . . . . . . . . . . . . . . . 19 Section 3.9. Properties: Absence of Encumbrances . . . . . . 20 Section 3.10. Intellectual Property . . . . . . . . . . . . . 20 Section 3.11. Contracts . . . . . . . . . . . . . . . . . . . 20 Section 3.12. Employees: Employee Benefit Matters . . . . . . 21 Section 3.13. Guarantees by Others. . . . . . . . . . . . . . 22 Section 3.14. Tax Matters . . . . . . . . . . . . . . . . . . 22 Section 3.15. Compliance with Law and Other Instruments: Regulatory Matters. . . . . . . .. 23 Section 3.16. Permits . . . . . . . . . . . . . . . . . . . . 23 Section 3.17. Environmental Matters . . . . . . . . . . . . . 23 Section 3.18. Insurance . . . . . . . . . . . . . . . . . . . 24 Section 3.19. Banks; Powers of Attorney . . . . . . . . . . . 24 Section 3.20. Brokerage Fees. . . . . . . . . . . . . . . . . 24 Section 3.21. Limitation of Representations and Warranties . . . . . . . . . . . . . . . . 24 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OE BUYER Section 4.1. Organization and Good Standing . . . . . . . . 24 Section 4.2. Investment Representation . . . . . . . . . . . 24 Section 4.3. Execution and Effect of Agreement . . . . . . . 24 Section 4.4. Restrictions. . . . . . . . . . . . . . . . . . 25 Section 4.5. No Lawsuits: Consents . . . . . . . . . . . . . 25 Section 4.6. Limitation of Representations and Warranties . . . . . . . . . . . . . . . .. 25 ARTICLE V. COVENANTS AND AGREEMENTS OF THE SELLER Section 5.1. Corporate Action. . . . . . . . . . . . . . . . 25 Section 5.2. Conduct of Business to Closing. . . . . . . . . 26 Section 5.3. Consents. . . . . . . . . . . . . . . . . . . . 27 Section 5.4. Covenant Against Competition. . . . . . . . . . 27 Section 5.5. Capital Liabilities . . . . . . . . . . . . . . 28 Section 5.6. Purchase Price Allocation . . . . . . . . . . . 28 Section 5.7. Access to Information and Cooperation . . . . . 28 Section 5.8. Public Statements . . . . . . . . . . . . . . . 28 ARTICLE VI. COVENANTS AND AGREEMENTS OF BUYER Section 6.1. Corporate Action. . . . . . . . . . . . . . . . 29 Section 6.2. Public Statements . . . . . . . . . . . . . . . 29 DEFINITIONS PAGE Section 6.3 Consents. . . . . . . . . . . . . . . . . . . . 29 Section 6.4. Certain Employee Benefit Matters. . . . . . . . 29 Section 6.5. Preservation of and Access to Certain Information and Cooperation After Closing. . . 30 Section 6.6. Nondisposition of Shares. . . . . . . . . . . . 31 ARTICLE VII. CONDITIONS OF OBLIGATIONS OF BUYER Section 7.1. Representations and Warranties True . . . . . . 31 Section 7.2. Covenants and Agreements-No Default . . . . . . 31 Section 7.3. Officer's Certificates. . . . . . . . . . . . . 31 Section 7.4. No Material Adverse Change. . . . . . . . . . . 31 Section 7.5. Consents. . . . . . . . . . . . . . . . . . . . 32 Section 7.6. Transaction Documents . . . . . . . . . . . . . 32 Section 7.7. Adverse Proceedings . . . . . . . . . . . . . . 32 ARTICLE VIII. CONDITIONS OF OBLIGATIONS OF SELLER Section 8.1. Representations and Warranties True . . . . . . 32 Section 8.2. Covenants and Agreements-No Default . . . . . . 33 Section 8.3. Officer's Certificates. . . . . . . . . . . . . 33 Section 8.4. Consents. . . . . . . . . . . . . . . . . . . . 33 Section 8 5. Transaction Documents . . . . . . . . . . . . . 33 Section 8.6. Adverse Proceedings . . . . . . . . . . . . . . 33 ARTICLE IX. INTENTIONALLY DELETED ARTICLE X. CLOSING Section 10.1. Closing . . . . . . . . . . . . . . . . . . . . 33 Section 10.2. Documents to be Delivered by Seller . . . . . . 34 Section 10.3. Documents to be Delivered by Buyer. . . . . . . 35 ARTICLE XI. MISCELLANEOUS Section 11.1. Survival of Representations, Warranties, Covenants and Agreements . . . . . . . . . . . 35 Section 11.2. Indemnification . . . . . . . . . . . . . . . . 36 Section 11.3. Disclaimer of Other Representations and Warranties by Seller . . . . . . . . . . . . .. 37 Section 11.4. Disclosure. . . . . . . . . . . . . . . . . . . 37 Section 11.5. Expenses and Taxes. . . . . . . . . . . . . . . 37 Section 11.6. Entire Agreement. . . . . . . . . . . . . . . . 37 Section 11.7. Amendment and Waiver. . . . . . . . . . . . . . 38 Section 11.8. Binding Agreement and Successors. . . . . . . . 38 Section 11.9. No Third Party Beneficiaries. . . . . . . . . . 38 Section 11.10. Notices. . . . . . . . . . . . . . . . . . . . 38 Section 11.11. Further Assurances. . . . . . . . . . . . . . . 39 Section 11.12. Article and Section Headings. . . . . . . . . . 39 Section 11.13. Governing Law. . . . . . . . . . . . . . .. . . 39 Section 11.14. Courts . . . . . . . . . . . . . . . . . . . . .39 Section 11.15. Construction . . . . . . . . . . . . . . . . . .39 Section 11.16. Counterparts. . . . . . . . . . . . . . . . . . 40 Section 11.17. Attorneys' Fees . . . . . . . . . . . . . . . . 40 BUSINESS COMBINATION AGREEMENT This BUSINESS COMBINATION AGREEMENT ("Agreement") is made as of May 22, i997, by and among C.N.S., INC., a New Jersey corporation (the "Corporation"), STANLEY NICE and JOHN CLEMENT, individuals, with a place of business at c/o C.N.S., INC., 100 Ford Road, Denville, New Jersey 07834 (collectively hereinafter referred to as the "Seller"), and IT PARTNERS INC., a Delaware corporation with its principal office at 1006 Highland Drive, Silver Spring, Maryland 20910 ("Buyer"). WITNESSETH: WHEREAS. Seller owns all of the issued and outstanding capital stock of the Corporation; WHEREAS, the Corporation is engaged in (i) refurbishing, upgrading, cleaning and repairing computers, audio-visual equipment and consumer products, as well as products used in connection with computers, audio-visual equipment and consumer products, and performing depot work on such computers,audio-visual equipment and consumer products and products related respectively thereto and (ii) performing computer network system integration, maintenance and support and selling, repairing and coordinating the use of the equipment related thereto; WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, in accordance with the terms and conditions of this Agreement, all of the issued and outstanding shares of capital stock of the Corporation: NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: Section 1.1. Affiliate. "Affiliate" shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise. Section 1.2. Balance Sheet. "Balance Sheet" shall mean the unaudited statement of net assets and liabilities of the Corporation as at February 28, 1997, a copy of which is attached hereto as Exhibit A. Section 1.3. Benefit Arrangements. "Benefit Arrangements" shall mean all profit sharing, life, health, hospitalization, savings, bonus, deferred compensation, incentive compensation, severance pay, disability, vacation, sick pay, holiday and fringe benefit plans, individual employment and severance contracts and other policies and practices of the Corporation, or any Affiliate thereof, providing employee or executive compensation or benefits to Employees or beneficiaries of Employees. other than Retirement Plans. Section 1.4. Buyer. "Buyer" shall have the meaning set forth above. Section 1.5. Buyer's Accountants. "Buyer's Accountants" shall mean the independent accounting firm of Ernst & Young. Section 1.6. Capital Liabilities. "Capital Liabilities" shall mean all outstanding debt of the Corporation in excess of $466,013.84 bank debt. Section 1.7. Citibank Rate. "Citibank Rate" shall mean the rate announced from time to time by Citibank, N.A. as its prime commercial lending rate in New York City, New York (U.S.A.). Section 1.8. Closing. "Closing" shall mean the consummation of the events described in ARTICLE IX. Section 1.9. Closing Balance Sheet. "Closing Balance Sheet" shall mean the audited statement of net assets and liabilities of the Corporation as at the Closing Date as prepared and delivered in accordance with Section 2.4. Section 1.10. Closing Date. "Closing Date" shall mean the date on which the Closing shall occur. Section 1.11. Code. "Code" shall mean the Internal Revenue Code of 1988 as amended. Section 1.12. Confidentiality Agreement. "Confidentiality Agreement" shall mean the Confidentiality Agreement dated as of December 31, 1996 between the Buyer and the Seller. Section 1.13. Corporation. "Corporation" shall have the meaning set forth above. Section 1.14. Dispute Resolution Firm. "Dispute Resolution Firm" shall mean the independent accounting firm of Arthur Andersen. Section 1.15. Employee. "Employee" shall mean each person who is a current employee, former employee, or retired employee of the Corporation or its predecessors. Section 1.16. Employee Benefit Plan. "Employee Benefit Plan" shall mean each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained or contributed to by the Corporation or any Affiliate thereof, which provides benefits to Employees, but excluding Multiemployer Plans. Section 1.17. ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. Section 1.18. Excluded Assets. "Excluded Assets" shall mean the assets listed in Schedule 1.25, any consideration or proceeds received by the Corporation upon the disposition thereof, and any reserves established by Seller or the Corporation for any Excluded Liabilities. Section 1.19. Excluded Liabilities. "Excluded Liabilities" shall mean the liabilities listed in Schedule 1.19. Section 1.20. Exhibit. "Exhibit" shall mean an exhibit to this Agreement. Section 1.21. Final Closing Balance Sheet. "Final Closing Balance Sheet" shall have the meaning set forth in Section 2.4. Section 1.22. Final Net Asset Value. "Final Net Asset Value" shall mean the Net Asset Value as finally determined pursuant to Section 2.4(a), whether by failure of Seller to deliver notice of objection, by agreement of the parties, or by final determination of the Dispute Resolution Firm. Section 1.23. Financials Date. "Financials Dates shall mean February 28, 1997. Section 1.24. Guarantees. "Guarantees" shall mean any obligations, contingent or otherwise, of a Person in respect of any indebtedness, obligation or liability of another Person, including but not limited to direct or indirect guarantees, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, take-or-pay agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income. or other financial condition, and agreements to make payment other than for value received. Section 1.25. H-S-R Act. "H-S-R Act" shall mean the Hart Scott-Rodino Antitrust Improvements Act of 1976. as amended. Section 1.26. Individual Returns. "Individual Returns" shall have the meaning set forth in Section 3.16. Section 1.27. Individual Taxes. "Individual Taxes" shall have the meaning set forth in Section 3.16. Section 1.28. Intellectual Property. "Intellectual Property" shall mean patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names. Section 1.29. IRS. "IRS" shall mean the Internal Revenue Service. Section 1.30. Material. "Material" (or "Materiality") when used with reference to information, a fact or circumstance, a course of action, a decision-making process, or other matter shall be limited to information, facts and circumstances, courses of action, decision- making process or other matters as to which there is a substantial likelihood that a reasonable purchaser of the Shares would attach importance in determining whether to purchase the Shares. Section 1.31. Material Adverse Effect. "Material Adverse Effect" when used with reference to a Person shall mean a material adverse effect on the business, properties (taken as a whole) or financial condition of the Person or Persons. Section 1.32. Material Contracts. "Material Contract" shall mean the contracts, agreements, commitments or other arrangements listed in Schedule 3.13. Section 1.33. MGAAP. "MGAAP" shall mean Generally Accepted Accounting Principles as in effect in the United States on the date of this Agreement, modified as provided in the notes to the Balance Sheet. Section 1.34. Net Asset Value. "Net Asset Value" shall mean total assets (not including any Excluded Assets) minus total liabilities (not including any Excluded Liabilities) as shown on the Proposed Closing Balance Sheet or the Final Closing Balance Sheet, as the case may be, each of which shall be prepared on a basis consistent with the Balance Sheet. Section 1.35. Offering Memorandum. "Offering Memorandum" shall mean a Confidential Memorandum prepared by Ernst 8 Young, LLP dated 1997. Section 1.36. PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation. Section 1.37. Person. "Person" shall mean any individual, corporation, unincorporated association, business trust, estate, partnership, trust, State, the United States or any other entity. Section 1.38. Proposed Closing Balance Sheet. "Proposed Closing Balance Sheet" shall have the meaning set forth in Section 2.4. Section 1.39. Purchase Price. "Purchase Price" shall have the meaning set forth in Section 2.3. Section 1.40. Retirement Plan. "Retirement Plan" shall mean any plan, fund, program or policy which provides retirement income to an Employee or results in a deferral of income by an Employee for periods extending to or beyond the termination of employment of the Employee by Seller and al; Affiliates thereof, and pursuant to which the Corporation or an Affiliate thereof has paid benefits or contributed funds or has an obligation to pay benefits or contribute funds in respect of such Employee. Section 1 41. Schedule. "Schedule" shall mean a schedule to this Agreement. Section 1.42. Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.43. Seller. "Seller" shall have the meaning set forth above. Section 1.44. Seller's Accountants. "Seller's Accountants" shall mean the independent accounting firm of Nimensky & Gallinson, P. A. Section 1.45. Senior Debt. "Senior Debt" shall mean such obligations to a third party or parties other than the Sellers that the Buyer shall have incurred prior to or at the Closing. Section 1.46. Shares. "Shares" shall mean all of the issued and outstanding shares of stock of the Corporation. Section 1.47. Subordinated Debt. "Subordinated Debt" shall mean the amount which the Buyer is obligated to the Seller as set forth Section 2.3 hereof. Section 1.48. Subsidiary. "Subsidiary," as it relates to any Person, shall mean a corporation more than 50% of whose outstanding securities the Person has the right, other than as affected by events of default, directly or indirectly, to vote for the election of directors. Section 1.49. Transaction Documents. "Transaction Documents" shall mean all other agreements. documents or instruments to be executed by a party hereto in connection with this Agreement. ARTICLE II PURCHASE AND SALE OF SHARES Section 2.1 Sale. On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, transfer, assign and deliver to Buyer or one or more of its designated Subsidiaries, free and dear of any lien, security interest, charge, encumbrance or claim, and Buyer hereby agrees to purchase from Seller the Shares on the Closing Date. Section 2.2. Purchase Price and Allocation. The entire consideration to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and delivery to Buyer of the Shares shall be $4,329,004.70 (the "Purchase Price), which shall be paid by Buyer to Seller at the time of Closing in the following manner As to cash, in the amount of $1,785,864..20 by wire transfer of immediately available funds into the trust account of Poe & Freireich P.A.; as to Subordinated Debt in the form of two promissory notes, one in the amount of $472,363.10 payable to Stanley Nice, and- a second in the amount of $432,900.47 payable to John Clement; and as to equity, stock certificates representing ownership of 305,585 shares of the common stock of Buyer, allocated 159,406 shares to Stanley Nice, and 151,116 shares to John Clement. At Closing, Buyer shall receive an original of the Company's note to its officers in the amount of $77,507.00, marked "Paid and Canceled." Section 2.3. Adjustment of Purchase Price. (a) As promptly as practicable, and in any event not more than 60 days following the Closing Date, Buyer together with Buyer's Accountants shall prepare and deliver to Seller and Seller's Accountants the Proposed Closing Balance Sheet. The Proposed Closing Balance Sheet shall be prepared on a basis consistent with, and as provided in, the Balance Sheet, and shall be audited and accompanied by the report of Buyer's Accountants. Seller and Seller's Accountants shall have the right to observe the physical inventories to be conducted by, and to consult during reasonable business hours with appropriate personnel of, Buyer and Buyer's Accountants and to have access to, and to review and make copies of, the work papers of Buyer's Accountants with respect to such inventories and the preparation of the Proposed Closing Balance Sheet. (b) (i) Seller may dispute the Proposed Closing Balance Sheet prepared by Buyer and Buyer's Accountants by notifying Buyer and Buyer's Accountants in writing, setting forth in reasonable detail the amount(s) in dispute and the basis for such dispute, within 45 days of Seller's receipt of the Proposed Closing Balance Sheet. If Seller fails to deliver a notice of objections within such 45-day period, Seller shall be deemed to have accepted the Proposed Closing Date Balance Sheet and the Net Asset Value thereon. In the event the aggregate amounts in dispute are less than $100,000, the Closing Net Asset Value proposed by Buyer and Buyer's Accountants shall be adjusted by one-half of the dispute amount, and such resolution shall be final, binding and conclusive on Seller and Buyer. (ii) In the event the amounts in dispute exceed $100,000, Buyer's Accountants and Seller's Accountants shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amount(s) shall be final, binding and conclusive on Seller and Buyer. If Buyer's Accountants and Seller's Accountants do not resolve any such dispute within 15 days of the date of receipt by Buyer or Seller's written notice of dispute, Buyer and Seller shall, within five additional days, retain the Dispute Resolution Firm, which firm shall, within 30 days of each submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive on Seller and Buyer. Such resolution shall be within the range of amounts defined by the amount proposed by Buyer's Accountants and the amount proposed by Seller's Accountants as to each disputed item. The fees and disbursements of the Dispute Resolution Firm shall be borne by Buyer and Seller in the proportion that the aggregate amount of disputed items submitted to the Dispute Resolution Firm that is unsuccessfully disputed by each party (as finally determined by the Dispute Resolution Firm) bears to the total amount of the disputed items as submitted to the Independent Accounting Firm. After resolving the items in dispute, the Dispute Resolution Firm shall prepare and deliver to each of Seller and Buyer the Final Closing Balance Sheet and a certification of the Net Asset Value thereon. (c) As promptly as possible and in any event not more than 60 day following the Closing Date, in the event that the Final Net Asset Value is less than the Net Asset Value stated on the Balance Sheet, Seller shall pay to Buyer the difference plus interest thereon from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the Citibank Rate. In the event that the Final Net Asset Value is greater than the Net Asset Value stated on the Balance Sheet, Buyer shall pay to Seller, the difference, plus interest on such amount from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal lo the Citibank Rate. Such payment shall be made in immediately available funds not later than two business days after the determination of the Final Net Asset Value by wire transfer to a bank account designated by the party entitled to receive the payment; (d) To the extent that the Final Net Asset Value is different from the Net Asset Value reflected on the Balance Sheet, the allocation of the Purchase Price shall be increased or decreased. as the case may be, by such difference; (e) the Purchase Price shall be adjusted subsequent to Closing by recalculating the EBITDA upon which the Purchase Price is based. EBITDA for this purpose will be calculated for the year ended as of the Date of Closing. To the extent this recalculated EBITDA times 6 exceeds the Purchase Price, the excess will be paid to the Seller not later than two business days after the recalculation and apportioned among cash (45%) common stock of the Buyer (35%) and debt (20%); (f) As promptly as possible and in any event not more than 60 days following the first anniversary of Closing, the Purchase Price shall be further adjusted based upon EBITDA for the year ended on the first anniversary of Closing. EBITDA will include any inventory write-up required by Buyer's Accountants as the result of a physical inventory count taken in connection with a certified audit conducted during this year. To the extent this recalculated EBITDA times 6 exceeds the post Closing adjusted Purchase Price, the excess will be paid to the Sellers not later than two business days after the recalculation and apportioned among cash (45%), common stock of the Buyer (35%) and a note (20%). Section 2.5 Board of Directors Membership: Amendments to Buyer's By-laws. Prior to Closing. Buyer will take such corporate action as is necessary to amend its by-laws or charter, in order to conform to the Shareholders' Agreement which Buyer and others become parties. Immediately following Closing, Buyer shall take such corporate action as may be necessary to cause Stanley Nice to become a member of Buyer's Board of Directors, and, if necessary, to reelect Stanley Nice to continue to serve on the Board until the negotiation of all of the shares of the common stock of Buyer acquired by Seller. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as follows: Section 3.1. Organization and Good Standing. The Corporation is duly organized, validly existing and in good standing under the laws of the State of New Jersey. The Corporation has full corporate power and authority to carry on its business as it is now being conducted. The Corporation is qualified as a foreign corporation in, and is in good standing under the laws of, each state set forth in Schedule 3.1, which are the only jurisdictions in which the failure of the Corporation to be so qualified would have a Material Adverse Effect on the Corporation. Section 3.2. Capitalization. The authorized capital stock of the Corporation consists of 1000 snares of common Stock, without par value, 1000 shares of which are outstanding. Each of the outstanding Shares has been duly authorized and validly issued and is fully paid and nonassessable. No shares of capital stock of the Corporation are held in treasury, and there are no other issued or outstanding equity securities of the Corporation and no other issued or outstanding equity securities of the Corporation convertible at any time into equity securities of the Corporation. Neither Seller nor the Corporation is subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Corporation at any time under options, subscriptions, warrants, rights or any other obligations. Neither the execution and delivery of this Agreement and the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will (a) violate any of the provisions of the charter or by-laws of the Corporation, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, permit or license or any statute, rule or regulation of any governmental body, or any agreement, indenture, mortgage or instrument to which Seller, or the Corporation is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Corporation. Section 3.3 Ownership of the Shares. Seller is the record and beneficial owner of the Shares, which are free and clear of any lien, security interest, charge, encumbrance or claim, and Seller has, or will have on the Closing Date, the right to transfer to Buyer complete and encumbered legal and equitable title to the shares. Section 3.4 Execution and Effect of Agreement. Seller has the ability and authority to enter into and consummate this Agreement and the Transaction Documents, and the execution and delivery of such agreements and the consummation of the transactions completed hereby have, if and to the extent necessary, been duly authorized. This Agreement has been duly executed and delivered by the Seller, and constitutes a legal, valid and binding obligation of each such Person executing such Agreement subject to such applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principals of equity (whether applied by a court of law or of equity). Section 3.5. Consents. Except (a) for filings, consents, approvals and authorizations that the failure to obtain or make would not have a Material Adverse Effect on the Corporation, (b) as set forth in Schedule 3.5, or (c) for filings, consents, waivers, approvals or authorizations pursuant to the H-S-R Act, no consent, waiver, approval or authorization of any governmental authority or of any third party or notice to or filing with any governmental authority or any third party, on the part of Seller, or the Corporation is required in connection with the execution and delivery by Seller of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 3.6. Balance Sheet. Except as set forth in Schedule 3.6, the Balance Sheet was prepared in accordance with MGAAP and fairly presents the Corporation's financial condition as of the date thereof. To Seller's knowledge, the Corporation has no Material liabilities or obligations, whether contingent or absolute, direct or indirect, matured or unmatured, which are not shown or provided for on the Balance Sheet or the notes thereto or set forth on Schedule 3.6, or any other Schedule to this Agreement, and Seller knows of no reasonable basis (as determined in Seller's reasonable judgment) for the assertion of any such liabilities or obligation. Section 3.7. Absence of Certain Changes. Since Febnuary28, 1997, except as disclosed on Schedule 3.7 or as otherwise contemplated by this Agreement, there has not been: (a) any change in the assets, liabilities, business, properties or operations of the Corporation, other than changes (i) described in the Schedules or (ii) made or incurred in the ordinary course of business, which taken in the aggregate have had a Material Adverse Effect on the Corporation: (b) any dividend or other distribution declared, paid or made on or in respect of the capital stock of the Corporation; (c) any employment or other contract or commitment entered into by the Corporation, except in the ordinary course of business; (d) a cancellation of any claim of or debts owed to the Corporation, except in the ordinary course of business; (e) excluding any inventory or obsolete assets disposed of in the ordinary course of business of the Corporation, any sale, assignment, transfer or other disposition of (i) any Intellectual Property of the Corporation, the cost of which on the accounting records of the Corporation exceeds $2,500.00 or (ii) any other assets of the Corporation, the cost of which on the accounting records of the Corporation exceeds $2,500.00; (f ) any capital expenditure capital addition or capital improvement by the Corporation involving an amount in excess of $100,000; (g) any mortgage, lien, pledge, encumbrance or security interest created on any assets, tangible or intangible of the Corporation, except purchase money security interests created in the ordinary course of business of the Corporation; (h) any damage, destruction or loss (whether or not covered by insurance incurred by the Corporation) which would have a Material Adverse Effect on the Corporation; (i) any labor disturbances of the Corporation which would have a Material Adverse Effect on the Corporation; or (j) to Seller's knowledge, any other event or condition which has had or, in the reasonable judgment of Seller, would likely have a Material Adverse Effect on the Corporation. Section 3.8. Litigation. Except as set forth in Schedule 3.8, Schedule 3.15 or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending or, to the knowledge of Seller, threatened by or before any court, any governmental or administrative agency or commission, or arbitrator, against Seller or the Corporation, in respect of this Agreement or any of the transactions contemplated hereby that would prevent a consummation of any of the transactions contemplated hereby. Except as set forth in Schedule 3.8, Schedule 3.15, or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending, or to the knowledge of Seller threatened, by or before any court, any governmental or administrative agency or commission, or arbitrator against or involving any of the businesses, properties, rights or assets of the Corporation, employees or agents, which reasonably could be expected to have a Material Adverse Effect on the Corporation. Section 3.9. Properties: Absence of Encumbrances. Schedule 3.9 sets forth a complete list of all real property leased, by the Corporation. With respect thereto: (a) the leases are in full force and effect and constitute valid and enforceable leasehold interests of the Corporation, free and dear of all liens, claims, security interests, encumbrances created by Seller that would have a Material Adverse Effect on the Corporation, (b) the Corporation is not in default and has not received any written notice of default under any lease where there reasonably could be expected to be a Material Adverse Effect on the Corporation, and (c) to the knowledge of Seller there is no event which with notice or lapse of time or both would constitute such a default by the Corporation or by a lessor. Section 3.10. Intellectual Property. Schedule 3.10 sets forth a complete list of all Intellectual Property of the Corporation on the date hereof and of all license agreements pursuant to which any such Intellectual Property is licensed (a) by or to the Corporation. The Corporation does not own, license or, to Seller's knowledge, use Intellectual Property Material in the continued operation of the Corporation's business that is not listed on Schedule 3.10. Except as otherwise indicated in Schedule 3.10, the Corporation uses the Intellectual Property listed in Schedule 3.10 free and clear of any royalty, lien, encumbrance or charge. Notwithstanding anything to the contrary contained herein, Seller make no representation or warranty, and no such representation or warranty shall be implied, that any of the Intellectual Property is valid or enforceable. To the knowledge of Seller, except as set forth in Schedule 3.08 or Schedule 3.10, the Corporation has not received, within the two year period immediately preceding the date of this Agreement, any notice or claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by the Corporation or of any claim by any third party alleging any such infringement or conflict. To the knowledge of Seller, except as set forth in Schedule 3.08 or Schedule 3.10, during the two-year period immediately preceding the date of this Agreement, the Corporation has not given any notice of infringement to any third party with respect to any of the Intellectual Property listed in Schedule 3.10. Section 3.11. Contracts. Schedule 3.1 1 sets forth a list of all contracts, agreements, commitments or other arrangements to which the Corporation is a party or by which the Corporation is obligated. Except for contracts, agreements, commitments or other arrangements set forth on Schedule 3.11 or other Schedules, as of the date of this Agreement the Corporation is not a party to or obligated by any: (a) Benefit Arrangements providing for aggregate payments of $50,000 or more in any 12 month period or any contract with employees, consultants or agents not terminable at will without cost or other liability by reason of such termination; (b) collective bargaining agreement; (c) guarantees by the Corporation of any obligation for the borrowing of $50,000 in the aggregate; (d) indentures, notes, mortgages, installment obligations, capital leases or other instruments relating to the borrowing of money in excess of $50,000 in the aggregate; (e) agreements, contracts or leases not listed on Schedule 3.09 (excluding open purchase orders and supply agreements entered into in the ordinary course of business) that involve the receipt or payment by the Corporation within one year of more than $100,000; and (f) executory contracts involving the acquisition or disposition of Material tangible or intangible assets other than in the ordinary course of business. Except as disclosed on Schedule 3.10 or as would not have a Material Adverse Effect on the Corporation, the Corporation is not in default under any Material Contract, has not waived any Material rights under any Material Contract and (to the knowledge of Seller) has no knowledge or notice that any party with whom it has a Material Contract is in default under any Material Contract. Section 3.12. Employees: Employee Benefit Matters. (a) Schedule 3.12 to this Agreement contains a true and complete list of all sales agents, consultants and employees of the Corporation (whether employed or engaged by written or oral agreement), their respective rates of compensation and any general or Material individual wage increase scheduled to take effect prior to Closing other than in the ordinary course of business. The Corporation has paid in full such employees, agents and consultants, or adequately reserved for, all wages, salaries, commissions, bonuses and other compensation for all services performed by them, except for such payments as are not yet due; and the Corporation is in compliance in all material respects with all laws and regulations respecting employment and employment practices, terms and conditions or employment, wages and hours. employee benefit plans and taxes (including withholding taxes) relating to employment; (b) Schedule 3.12 sets forth a list of all Employee Benefit Plans, all Material Benefit Arrangements, all Multiemployer Plans, and all Retirement Plans. Except as set forth in Schedule 3. 14, with respect to each of such Employee Benefit Plans, Benefit Arrangements and Retirement Plans, Seller has delivered or made available to Buyer, as and if applicable, copies of (i) the text or formal plan document, including amendments and the summary plan description, (ii) the most recent IRS determination letter relating to the qualification of Retirement Plans under Section 401 of the Code and the related trust's qualification under Section 501 of the Code, (iii) the trust agreements, insurance contracts or other documents that constitute all or a part of the funding vehicle, (iv) in the case of all Employee Benefit Plans, the most recent annual reports (IRS Form 5500s), including the schedules thereto, and (v) the most recent actuarial reports or other financial reports; (c) Except as set forth in Schedule 3.12, (i) all Employee Benefit Plans comply in all Material respects with ERISA and the Code; (ii) the Corporation have paid all contributions due under any of the Employee Benefit Plans and Multiemployer Plans to which they are required to contribute; and (iii) the Corporation do not have minimum funding deficiencies or Multiemployer Plan withdrawal liabilities (including without limitation liabilities imposed by virtue of any other member of a controlled group having such liabilities imposed on it); (d) Except as set forth in Schedule 3.12, there are no Material actions, suits or claims pending or, to the knowledge of Seller, threatened against any Employee Benefit Plan, any Retirement Plan, any Benefit Arrangement, or any administrator or fiduciary thereof, other than benefit claims arising in the normal course of operation of such Employee Benefit Plans, Benefit Arrangements, or Retirement Plans; and (e) To the knowledge of Seller, the Corporation has not engaged in any non-exempt "Prohibited Transaction," as defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Employee Benefit Plan or with respect to any other parties-in-interest. Section 3.13. Guarantees by Others. Schedule 3.13 sets forth a complete list of the date hereof of all Guarantees of the Corporation for the benefit of Persons doing business with the Corporation. Section 3.14. Tax Matters. (a) The Corporation has filed (including extensions) all federal, state, local, and other tax returns (the "Individual Returns") required to be filed by it under applicable law, including estimated tax returns and reports, and the Corporation has paid all required Material federal, state and local income and other applicable taxes, additions to such taxes, penalties and interest with respect thereto (the "Individual Taxes") due and payable on or before the date hereof (and will duly and timely pay all such amounts required to be paid between the date hereof and the Closing Date). The Corporation has paid, withheld or adequately provided for (or will adequately provide for) any and all Individual Taxes in respect of the conduct of its business or the ownership of its property and in respect of any transaction for which such taxes are due or would be due if the current tax period ended at the close of business on the Closing Date; (b) Seller has delivered or made available (or will make available prior to Closing) to Buyer copies of all tax returns filed by the Corporation for all tax years beginning with the year ended December 31, 1996, together with all tax basis fixed asset schedules and any information necessary to document differences between tax basis accounting and MGAPP accounting reflected on the Proposed Closing Balance Sheet and related income statements; (c) No Material proposed taxes, addition to tax, interest, or penalties have been asserted against the Corporation except those that have been paid in full, those that would not have a Material Adverse Effect on the Corporation, and those as set forth in Schedule 3.16. There are no agreements, waivers, or other arrangements providing for extensions of time in respect of the assessment or collection of any unpaid tax against the Corporation, except as set forth in Schedule 3.14; and (d) No election or consent under Section 341(f) of the Code has been made or shall be made on or prior to the Closing Date by or on behalf of the Corporation. Section 3.15. Compliance with Law and Other Instruments: Regulatory Matters. Except as set forth on Schedule 3.15 or Schedule 3.16, (a) the business of the Corporation has been and is being conducted in accordance with all applicable laws, ordinances, rules and regulations of all authorities (exclusive of Environmental Laws as defined in and covered by Section 3.17 below), violation of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Corporation; and (b) the Corporation is not in violation of, or in default under, any term or provision of its charter documents or of any lien, indenture, lease, agreement, instrument, commitment or other arrangement, or subject to any restriction of any kind or character, which reasonably could be expected to have a Material Adverse Effect on the Corporation. Section 3.16. Permits. Schedule 3.16 sets forth a list of all governmental approvals, authorizations, licenses and permits of all governmental agencies necessary to the conduct of the business of the Corporation on the date hereof. Except as set forth in Schedule 3.16, all such approvals, authorizations, licenses and permits are in full force and effect and, to the knowledge of Seller, no proceedings to revoke them are pending or threatened and the Corporation is in compliance with the terms and conditions under which they were issued or granted. Section 3.17. Environmental Matters. Except as set forth on Schedule 3.17, the property leased by the Corporation and described in Section 3.09 ("Property") and its existing and, to the knowledge of Seller, prior uses comply and have at all times complied with, and the Corporation is not in violation of and has not voided, in connection with the use, maintenance or operation of its business, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances, codes, licenses or permits rating to the handling, manufacturing, treatment, storage, disposal, discharge, use or transportation of hazardous or toxic substances, materials or wastes, including without limitation the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Toxic Substances Control Act (collectively, "Environmental Laws"). To Seller's knowledge, except as set forth on Schedule 3.17, the Corporation has received no notice that any Environmental Laws or other federal, state or local statutes, orders, rules or regulations, ordinances or governmental policies require any work, repairs, construction or capital expenditures with respect to the Property. Section 3.18. Insurance. The Corporation is named as an insured with insurance carriers not related to or affiliated with the Seller in amounts and against all risks nominally insured against by Persons operating similar businesses in similar locations. Schedule 3.18 sets forth a list of the insurance coverage in effect as of the date of this Agreement. Section 3.19. Banks; Powers of Attorney. Schedule 3.19 sets forth as of the date of this Agreement: (a) the names and locations of all banks. trust companies, savings and loan associations and other financial institutions at which the Corporation maintains safe deposit boxes or accounts of any nature to which it has access, and the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto; and (b) the names of all Persons to whom the Corporation has granted a power of attorney. Section 3.20. Brokerage Fees. Except for Equinox Financial Limited, whose fees Seller shall pay, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon any agreements, written or oral, made by or on behalf of Seller or by or on behalf of any director, officer, employee, agent or Affiliate of Seller. Section 3.21. Limitation of Representations and Warranties. Except as expressly set forth herein, neither Seller makes any representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. ARTICLE IV REPRESENTATIONS AND WARRANTIES OE BUYER Buyer represents and warrants to Seller as follows: Section 4.1. Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has full corporate power and authority to carry on its businesses as they are now being conducted. Section 4.2. Investment Representation. Buyer is aware that the Shares are not registered under the Securities Act. Buyer possesses such knowledge and experience in business matters that it is capable of evaluating the merits and risks of its investments hereunder. Buyer is acquiring the Shares for its own account, for investment purposes only and not with a view to the distribution thereof. Section 4.3. Execution and Effect of Agreement. Buyer has the corporate power and authority to enter into this Agreement and the Transaction Documents, and the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Each of the Transaction Documents, upon its execution and delivery by Buyer, will constitute a legal, valid and binding obligation of each such Person executing such Agreement, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Section 4.4. Restrictions. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) violate any of the provisions of the charter or by-laws of Buyer, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Buyer is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of the foregoing clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Buyer. Section 4.5. No Lawsuits; Consents. There is no lawsuit, proceeding or investigation pending or, to the knowledge of Buyer threatened, against Buyer the effect of which would prevent the consummation of any of the transactions contemplated hereby. Except (a) for filings, consents, waivers, approvals and authorizations as to which the failure to obtain or make would not have a Material Adverse Effect on the Buyer, and (b) for filings, consents, waivers, approvals and authorizations pursuant to the H-S-R Act, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of the Buyer is required in connection with the execution and delivery of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 4.6. Limitation of Representations and Warranties. Except as expressly set forth herein, Buyer makes no representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. ARTICLE V COVENANTS AND AGREEMENTS OF THE SELLER Seller covenants and agrees for the benefit of Buyer as follows: Section 5.1. Corporate Action. Seller shall take, and shall cause the Corporation to take, all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Seller shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 5.2. Conduct of Business to Closing. Except as contemplated by this Agreement, Seller shall not cause the business of the Corporation to be conducted other than in the ordinary course. Except as contemplated by or set forth in this Agreement or the Schedules, annexed hereto, or as consented to in writing by Buyer (which consent shall not be unreasonably withheld), Seller shall act, or cause the Corporation to act, as follows: (a) The Corporation will not adopt any Material change in any method of accounting or accounting practice, except as contemplated or required by MGAPP or Schedule 3.6; (b) The Corporation will not amend its charter or by laws (or other similar organizational documents); (c) Except (i) in the ordinary course of business, (ii) as required by law, (iii) as required or appropriate to maintain the qualification of any Employee Benefit Plan or Benefit Arrangement under applicable tax laws or under ERISA, (iv) as required by existing Employee Benefit Plans, Retirement Plans, or Benefit Arrangements, or (v) as otherwise contemplated by this Agreement, the Schedules, or the Exhibits, neither the Corporation nor any Affiliate will enter into or amend any Employee Benefit Plan or Benefit Arrangement covering Employees, or give any general or Material individual wage or salary increase to its Employees; (d) The Corporation shall not enter into any collective bargaining agreement covering Employees; (e) Except (i) in the ordinary course of business, (ii) as otherwise contemplated by this Agreement or the Schedules, or (iii) in connection with the transfer of any of the Excluded Assets, the Corporation will not sell, mortgage, pledge, or otherwise dispose of any substantial assets or properties; (f) Except as contemplated by this Agreement or the Schedules, the Corporation will not merge or consolidate with, or agree to merge or consolidate with, or purchase or agree to purchase all or substantially all of the assets of, or otherwise acquire, any other business entity; (g) Except as contemplated by this Agreement or the Schedules, the Corporation will not (i) authorize for issuance issue or sell any additional shares of its or its Subsidiaries' capital stock or any securities or obligations convertible into shares of its Subsidiaries' capital stock or issue or grant any option. warrant or other right to purchase any shares of its capital stock, or (ii) declare or pay any dividend or other distribution on or in respect of its capital stock: (h) The Corporation will maintain its existing insurance policies, or comparable coverage, in full force and effect; (i) Except in the ordinary course of business or as contemplated by this Agreement or the Schedules, the Corporation will not incur or agree to incur long-term debt for borrowed money; and (j) The Corporation shall not make any capital expenditure, capital addition, or capital improvement exceeding $25,000. Section 5.3. Consents. Seller shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, it being understood that neither Seller shall be under any obligation to pay money to any third party (other than fees imposed by statute or regulation to obtain governmental consents or approvals) as a condition to receiving any such consents, waivers or authorizations and (ii) cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. Section 5.4. Covenant Against Competition. (a) Except as modified by the Employment Agreement between Buyer and Stanley Nice and the Consulting Agreement between Buyer and John Clement, the Seller shall not, directly or indirectly, during the term of and for a period of twelve months after the expiration of such Employment Agreement or Consulting Agreement, as the case may be, engage in the Corporation's business within a 500-mile radius of the place of such employment or the principal place of business of Buyer; (b) Except as may be required by law or in the bona fide prosecution of its rights under this Agreement or any Transaction Document, after Closing the Seller shall not use or disclose any confidential information principally concerning the Corporation's business; (c) Seller acknowledges and agree that it would be difficult to fully compensate Buyer for damages resulting from the breach or threatened breach of the foregoing provisions of this Section 5.5 and, accordingly that Buyer shall be entitled to temporary and injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, to enforce such provisions upon proving that it has suffered or that there is a substantial probability that it will suffer irreparable harm and without the necessity of posting any bond or other understanding in connection therewith. This provision with respect to injunctive relief shall not, however, diminish Buyer's right to claim and recover damages; and (d) The provisions of this Section 5.5 are severable and if any one or more of them may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions, and any partially unenforceable provisions to the extent enforceable, shall nevertheless be binding and enforceable. For purposes of this Section, each of clauses (a) through (c) except for leases and time payments shall be considered a separate covenant such that if the geographic scope of any such clause shall be determined by a court to be invalid, that clause shall be severed and the remaining clauses shall remain in full force and effect. Section 5.5. Capital Liabilities. No later than Closing, Seller shall cause such Capital Liabilities, as may exist at Closing, including all interest accrued thereon, to be fully satisfied or to specifically provided for on Schedule 1.19, except for leases and time payments thereafter. Section 5.6. Purchase Price Allocation. Seller acknowledges that the allocation of the Purchase Price as set forth in Section 2.3 has been negotiated among the parties and is consistent with the value of the Shares and the covenants of Seller under Section 5.4. Seller and Buyer shall each use such allocation of the Purchase Price in any tax returns or other reports filed with taxing authorities which deal with the transactions contemplated in this Agreement. Section 5.7. Access to Information and Cooperation. (a) Subsequent to the date of this Agreement, Seller shall give Buyer, its counsel, and its consultants full and complete access, upon reasonable notice during normal business hours, to all records and affairs of the Corporation within their possession and will provide copies of such information concerning the Corporation as Buyer may reasonably request for any proper purpose, including without limitation in connection with the preparation of any tax returns or financial statements or in connection with any judicial, quasi judicial, administrative, tax audit or arbitration proceeding: and (b) Seller shall at its expense cooperate fully with the Buyer in the defense or pursuit of any claim or action which relates to occurrences involving the business of the Corporation prior to the Closing Date that does not relate to an Excluded Asset. Section 5.8. Public Statements. Seller shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in public dissemination thereof without the prior written consent of Buyer (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Seller, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Seller has received such counsel's opinion, (i) Seller shall advise Buyer of the opinion and (ii) at Buyer's request, Seller shall provide a copy to Buyer, and further provided that Seller shall be permitted to disclose to Employees, and upon Buyer's request to give Buyer the opportunity to make a joint statement with Seller to Employees, concerning the terms of Benefit Arrangements and Employee Benefit Plans available to Employees following Closing. ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Buyer covenants and agrees for the benefit of Seller as follows Section 6.1. Corporate Action. Buyer shall take all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Buyer shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 6.2. Public Statements. Buyer shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in public dissemination thereof without the prior written consent of Seller (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Buyer, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Buyer has received such counsel's opinion, (i) Buyer shall advise Seller of the opinion and (ii) at Seller's request, Buyer shall provide a copy to Seller. Section 6.3 Consents. (a) Buyer shall promptly make any and all filings that are or may be required under the H-S-R Act and shall cooperate with Seller in connection with similar filings by Seller. Buyer shall cooperate and use reasonable efforts to ensure that any pre-acquisition waiting period required by the H-S-R Act expires or is otherwise terminated, and shall comply promptly with any requests made pursuant to the FI-S-R Act or the regulations thereunder; and (b) Buyer shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, provided that Buyer shall not be under any obligation to pay money to any third party as a condition to receiving any such consents, waivers or authorizations, and (ii) cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Section 6.4. Certain Employee Benefit Matters. (a) Commencing upon the Closing Date, Buyer shall cause the Corporation to continue to employ each Employee who is an employee on the Closing Date upon the same terms and conditions of employment as pertained to each Employee on the day immediately preceding the Closing Date and as are specifically described in the Schedules to this Agreement, provided that this undertaking shall in no way diminish the Corporation's existing rights to lay off employees or to terminate employees on account of unacceptable performance or otherwise in accordance with the terms of any contracts of employment. If any Employee is laid off or on leave on the Closing Date, Buyer shall cause the Corporation to recall or reinstate such Employee in accordance with the layoff or leave of absence policy of the Corporation that is in effect on the date of this Agreement and is specifically described in the Schedules. Buyer shall take all reasonable action required or appropriate to cause the Corporation to fulfill all obligations of the employer under all Benefit Arrangements, Employee Benefit Plans, Multiemployer Plans, and Retirement Plans as of the Closing Date (including without 1imitation severance payments or benefits that have accrued, or that accrue or inure, on or after the Closing Date or that inure after the date of this Agreement and prior to the Closing Date as a result of action taken by Seller with consent of Buyer) which are specifically described on the Schedules, except as may be required otherwise by law; and (b) The Buyer shall maintain and keep available a pool of options for the acquisition of the common stock of Buyer, which option shall, from time-to-time and at the sole discretion of Buyer, be made available to the employees of the Company. Section 6.5. Preservation of and Access to Certain Information and Cooperation After Closing. (a) Buyer shall, and from and after the Closing Date shall cause the Corporation and its Affiliates, to preserve all books and records of the Corporation until Seller notifies Buyer that all statutes of limitations relating to ta periods to which such records relate have expired, and thereafter not to destroy or dispose of such records without notice to Seller offering it the right to copy such records. Except as prohibited or limited by law or regulation, Buyer shall, and shall cause the Corporation from and after the Closing Date to, give Seller and Seller's employees, accountants, counsel, and advisors, reasonable access upon reasonable notice and for proper business purposes during normal business hours, to all officers, employees, offices, properties, agreements, books, records and affairs of the Corporation, in a manner that does not unreasonably interfere with the normal conduct of its business. Buyer shall, and shall cause the Corporation to, prepare and transmit such financial reports in accordance with past practices and procedures and on a timely basis as may be necessary for Seller or its Affiliates to prepare any Consolidated Tax Return, and ensure that Seller and its authorized representatives shall be free, during the period referred to in the first sentence of this Section, to make copies of such books, records, files and data concerning the Corporation for the following purposes: (i) the review of the Proposed Closing Balance Sheet and the resolution of any disputes with respect to the Proposed Closing Balance Sheet, (ii) the preparation of any tax returns for the Affiliated Group, (iii) or in anticipation of any judicial, quasi judicial, administrative, tax audit, or arbitration proceeding initiated by or against third parties and relating to the Corporation, and (iv) in connection with any claim relating to Excluded Assets or Excluded Liabilities. Except as may be required by law or in the bona fide prosecution of its rights under this Agreement or any Transaction Document and except as specifically provided above, Seller shall not use or disclose any such information; and (b) Buyer shall after Closing cause the Corporation, at Seller's expense to, cooperate fully and to such extent as is reasonable under the circumstances with Seller in the defense of pursuit of any claim or action that relates to an Excluded Liability or an Excluded Asset. Section 6.6. Nondisposition of Shares. Buyer shall not, and shall not permit any of their Affiliates to, sell, transfer, offer for sale, pledge, hypothecate, or otherwise dispose of the Shares except pursuant to a valid registration under the Securities Act, unless an exemption from registration under the Securities Act is available. ARTICLE VII CONDITIONS OF OBLIGATIONS OF BUYER The obligations of Buyer to consummate the purchase of the Shares on the Closing Date and to perform its other covenants and agreements in accordance with the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Buyer, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to Buyer as the result of the failure to satisfy such condition. Section 7.1. Representations and Warranties True. Except as otherwise permitted, contemplated, or limited by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Seller contained in ARTICLE III that is limited by Materiality shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date, and (b) each of the representations and warranties that is not so limited shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date. Section 7.2. Covenants and Agreements-No Default. Seller shall not be in default in respect of any obligation under this Agreement and Seller shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by them prior to or as of the Closing Date. Section 7.3. Officer's Certificates. Seller shall have furnished Buyer with a certificate signed by a corporate officer confirming the satisfaction of the conditions set forth in Section 7.1 and Section 7.2. Section 7.4. No Material Adverse Change. Except as permitted or contemplated by this Agreement or any Schedule, or disclosed in the Balance Sheet, since the Financials Date the Corporation shall not have suffered an adverse change in its business or financial condition that could reasonably be expected to have a Material Adverse Effect on the Corporation. Section 7.5. Consents. Seller shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement other than those that are not Material or set forth in Schedule 3.7, and all applicable waiting periods in respect of the transactions contemplated by this Agreement under the H-S-R Act shall have expired or otherwise terminated, it being understood that (a) the Seller shall not be under any obligation to pay money to any third party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations, and (b) Seller shall use reasonable efforts to cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. In the event Seller is unable to obtain any such consents, the condition contained in this Section 7.5 shall be deemed satisfied if Seller provides to Buyer and, other than as to matters identified on Schedule 3.13, in a manner and form satisfactory to Buyer in its sole discretion, at the Closing the economic equivalent of any rights that would have inured to the Buyer had such consents been obtained. Buyer shall have obtained all third-party consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 4.5. Section 7.6. Transaction Documents. Seller shall have provided Buyer with all of the documents required by Section 10.2 to be delivered at Closing by Seller. Section 7.7. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or any Material Transaction Document or against or involving the Corporation where the outcome might reasonably be expected to have a Material Adverse Effect on the Corporation. ARTICLE VIII CONDITIONS OF OBLIGATIONS OF SELLER The obligation of Seller to consummate the sale of the Shares on the Closing Date and to perform their other covenants and agreements in accordance with the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Seller, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to Seller or its Affiliates as the result of the failure to satisfy such condition. Section 8.1. Representations and Warranties True. Except as otherwise permitted or contemplated by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Buyer contained in ARTICLE IV that is limited by Materiality shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date and (b) each of the representations and warranties that is not so limited shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date. Section 8.2. Covenants and Agreements-No Default. Buyer shall not be in default in respect of any obligation under this Agreement and Buyer shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by Buyer prior to or as of the Closing Date. Section 8.3. Officer's Certificates. Buyer shall have furnished Seller with a certificate signed by a corporate officer confirming the satisfaction of the conditions set forth in Sections 8.1 and 8.2. Section 8.4. Consents. Buyer shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 4.5, and all applicable waiting periods in respect of the transactions contemplated by this Agreement under the H-S-R Act shall have expired or otherwise terminated, it being understood that (a) Buyer shall not be under any obligation to pay money to any third-party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations and (b) Buyer shall use reasonable efforts to cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Seller shall have obtained all third-party and governmental consents, waivers, authorizations, and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 3.7 or are set forth in Schedule 3.7. Section 8 5. Transaction Documents. Buyer shall have provided Seller with all of the documents required by Section 10.3 to be delivered at Closing by Buyer. Section 8.6. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or the Transaction Documents. ARTICLE IX INTENTIONALLY DELETED ARTICLE X CLOSING Section 10.1. Closing. The Closing shall take place at the offices of Semmes, Bowen 8 Semmes, 250 West Pratt Street, Baltimore, Maryland 21201, on May 21, 1997 at 1C:00 a.m., or at such other place and at such other time and date as may be mutually agreed upon in writing by Buyer and Seller, only upon fulfillment of (a) all the conditions set forth in ARTICLE VII that have not been waived by Buyer, and (b) all the conditions set forth in ARTICLE VIII that have not been waived by Seller. If such conditions have not been fulfilled or waived by such date, the Closing shall take place within five business days after fulfillment or waiver of all such conditions but in no event later than June 1, 1997 unless otherwise mutually agreed to in writing by the Buyer and the Seller. All proceedings to be taken and all documents to be executed and delivered by Seller in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Buyer and its counsel. All proceedings to be taken and all documents to be executed and delivered by Buyer in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Seller and its counsel. All proceedings to be taken and all documents to be executed and delivered at the Closing shall be deemed to have been taken and executed simultaneously, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed or delivered. Section 10.2. Documents to be Delivered by Seller. At the Closing, Seller shall deliver, or shall cause to be delivered. to Buyer the following: (a) Certificates representing the Shares, which certificates shall be duly endorsed in blank or, in lieu thereof, shall have affixed thereto stock powers executed in blank and in proper form for transfer; (b) Employment Contracts for certain employees of the Corporation. (c) An opinion of counsel for Seller, dated the Closing Date, substantially in the form attached hereto as Exhibit C; (d) Certificates of a Vice President, the Secretary or an Assistant Secretary of Seller, dated the Closing Date, setting forth the resolutions of the Board of Directors of Seller authorizing the execution and deli-very of this Agreement and the consummation of the transactions contemplated hereby, and certifying that such resolutions have not been amended or rescinded and are in full force and effect; (e) A good standing certificate and a copy of the Corporation's charter, certified as of a date reasonably close to the Closing Date; (f) The certificate contemplated by Section 7.3; (g) Such other documents, instruments or agreements as may be reasonably requested by Buyer to effectuate the transactions contemplated by this Agreement; and (i) The "Paid and Canceled" note provided for in Section 2.2. Section 10.3. Documents to be Delivered by Buyer. At the closing, Buyer shall deliver, or cause to be delivered, to Seller the following: (a) A wire transfer of funds to the account designated by Seller in an amount equal to the cash portion of the Purchase Price, as provided in Section 2.2; (b) A note in favor of the Seller as provided for in Section 2.2 (c) Certificates representing 305,585 shares of the common stock of the Buyer. (d) An opinion of Semmes Bowen 8 Semmes, counsel for Buyer, dated the Closing Date, substantially in the form attached hereto as Exhibit D; (e) Certificates of the Secretary or an Assistant Secretary of Buyer, dated the Closing Date, setting forth copies of the resolutions of the Board of Directors of Buyer, authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and certifying that such resolutions have not been amended or rescinded and are in full force and effect: (f) The certificate contemplated by Section 8.3; (g) Subordination Agreement in connection with Section 10.3 (b) (h) Such other documents, instruments or agreements as may be reasonably requested by Seller to effectuate the transactions contemplated by this Agreement; and (i) The Employment Agreement and Consulting Agreement referred to in Section 5.4. (j) The Subordination Agreement in respect to the notes referred to in Section 2.3. ARTICLE XI MISCELLANEOUS Section 11.1. Survival of Representations, Warranties, Covenants and Agreements. Except as otherwise expressly provided in this Agreement, all covenants and all representations and warranties made by the parties in this Agreement (including statements contained in any Schedule or certificate or other instrument delivered by or on behalf of a party to this Agreement) shall survive the execution of this Agreement and the Closing and any investigations, examinations or audits made by or on behalf of the parties, provided that representations and warranties shall survive only until the applicable "Expiration Date" as follows: (a) The Expiration Date for the representations and warranties made in Section 3.16 shall be the date on which all applicable tax statutes of limitation have expired; and (b) The Expiration Date for all other representations and warranties made in this Agreement shall be the date of the payment of the Subordinated Debt to Seller. On the applicable Expiration Date, the associated representations and warranties shall have no further force or effect and all liabilities of the parties thereunder shall be extinguished, provided that if prior to the Expiration Date a party has delivered to the other party a notice asserting a good faith claim for breach of representation and warranty, that specific claim shall survive and be actionable after the Expiration Date. Section 11.2. Indemnification. (a) Seller shall hold harmless and indemnity Buyer from and against all claims, actions, damages, liabilities or losses (including court costs and attorneys fees) (collectively, "Losses") arising out of: (i) the breach by Seller of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement; and (ii) products liability claims asserted against or paid by the Corporation (after having used reasonable and appropriate efforts to avoid or reduce such payments), but only where such claims are asserted within 18 months after the Closing Date and in respect of products shipped prior to the Closing Date; (b) Buyer shall hold harmless and indemnify Seller from and against all Losses arising out of: (i) the breach by Buyer of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement; (ii) the breach by Buyer or, after Closing, the Corporation of any agreements with any third parties; (iii) actions wrongfully taken with respect to the Corporation by Buyer or its Affiliates, or by the Corporation after Closing; and (iv) actions taken with respect to the corporation by Seller prior to Closing at the request of Buyer; (c) For purposes of this Section 11.2, any Losses incurred by the Corporation shall be deemed to have been incurred by Buyer; (d) After the Closing, Seller shall not be entitled to contribution from, or recovery against, the Corporation with respect to any liability of Seller which may arise under this Section 11.2, and (e) Consummation of the transactions contemplated by this Agreement and the Transaction Documents shall not be deemed to be a waiver of. any right or remedy of a party, nor shall this Section 11.2 or any other provision of this Agreement be deemed to be a waiver of any ground of defense by a Party Section 11.3. Disclaimer of Other Representations and Warranties by Seller. The parties hereto acknowledge and agree that Seller does not make, and has not made, any representations or warranties relating to the Corporation, or any of the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in this Agreement. Without limiting the generality of the disclaimer set forth in the preceding sentence, Seller does not make, has not made and shall not be deemed to have made any representations or warranties in the Offering Memorandum, in any presentation relating to the businesses of the Corporation given in connection with the transactions contemplated by this Agreement, in any filing made by or on behalf of the Corporation with any governmental agency, or in any other information provided to or made available to Buyer and not included in the Schedules to this Agreement, and no statement contained in the Offering Memorandum or made or contained in any such presentation, filing, or information shall be deemed a representation or warranty hereunder or otherwise. No person has been authorized by Seller, or the Corporation to make any representation or warranty in respect of Seller, or the Corporation in connection with the transactions contemplated by this Agreement. Section 11.4. Disclosure. Notwithstanding any provision to the contrary contained in this Agreement, the Exhibits or the Schedules, any information disclosed in one Schedule shall be deemed to be disclosed in all Schedules. Certain information set forth in the Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment or agreement that the information is required to be discussed in connection with the representations and warranties made in this Agreement or that the information is Material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is Material. Section 11.5. Expenses and Taxes. All legal, accounting and other costs and fees incurred by the Corporation and the Seller in connection with the transactions contemplated by this Agreement shall be borne and paid for by the Corporation prior to Closing. All legal, accounting and other costs and fees incurred by Buyer in connection with the transactions contemplated by this Agreement and all taxes (other than value added taxes or taxes on, relating to or measured by income or gains), stamp duty, notarial, registration and recording fees and similar taxes resulting from or relating to the transfer of any of the Shares to Buyer or any party designated by Buyer shall be borne by Buyer. Section 11.6. Entire Agreement. This Agreement, the Schedules, and the Exhibits constitute the entire agreement and understanding between the parties hereto in respect of the matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement (including without limitation the Offering Memorandum), other than the Confidentiality Agreement, are merged herein and are superseded and canceled by this Agreement. Other than as expressly set forth in this Agreement and the Schedules and Exhibits, no representations, warranties, covenants, agreements or conditions, express or implied, whether by statute or other wise, have been made by the parties hereto. Section 11.7. Amendment and Waiver. This Agreement may be amended, modified, supplemented or changed in whole or in part only by an agreement in writing making specific reference to this Agreement and executed by each of the parties hereto. Any of the terms and conditions of this Agreement may be waived in whole or in part, but only by an agreement in writing making specific reference to this Agreement and executed by the party that is entitled to the benefit thereof. Section 11.8. Binding Agreement and Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that prior to the consummation of this Agreement the rights of the parties hereunder may not be assigned, and provided that the obligations of the parties hereunder may not be delegated, in whole or in part, without the prior written consent of the other party hereto. Section 11.9. No Third Party Beneficiaries. Nothing in this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies. Section 11.10. Notices. Any notice, request, instruction or other document or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to be given upon (i) delivery in person, (ii) five days after being deposited in the mail, postage prepaid, for mailing by certified or registered mail, (iii) one day after being deposited with an overnight courier, charges prepaid, or (iv) when transmitted by facsimile, with a copy simultaneously sent as provided in clauses (ii) and (iii), in every case as follows: If to Buyer, delivered or mailed to: IT Partners Inc. 1006 Highland Drive Silver Spring, Maryland 20910 Attention: Daniel J. Klein with a copy delivered or mailed by the same method to: Kevin M. O'Connell, Esquire Semmes, Bowen & Semmes 250 West Pratt Street Baltimore, Maryland 21201 If to Seller, delivered or mailed to: Stanley Nice John Clement C.N.S., Inc. 100 Ford Road Denville, New Jersey 07834 with a copy delivered or mailed by the same method to: Harvey R. Poe, Esq. Poe & Freireich, P.A. 256 Columbia Turnpike Columbia Commons, Suite 202 Florham Park, New Jersey 07932 or to such other address or addresses as may be specified in writing at any time or from time to time by either party to the other party hereto. Section 11.11. Further Assurances. The parties hereto each agree to execute, make, acknowledge, and deliver such instruments, agreements and other documents as may be reasonably required to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Section 11.12. Article and Section Headings. The Article, Exhibit and Section headings contained in this Agreement, the Exhibits and the Schedules are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement, the Exhibits, or the Schedules or any of their terms and conditions. Section 11.13. Governing Law. This Agreement shall be construed and enforced in accordance with and shall be governed by the laws of the State of Maryland, without regard to its conflict of law provisions and principles. Section 11.14. Courts. Any dispute arising from the interpretation or operation of this Agreement shall be resolved in the courts of the State of Maryland, and the parties hereby consent to and elect, and waive any objection to, such jurisdiction in the event of litigation hereunder. Section 11.15. Construction. As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties hereto understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto. Section 11.16. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. Section 11.17. Attorneys' Fees. Should legal proceedings be instituted to enforce the provisions of this Agreement or any Transaction Document, the prevailing party shall be entitled to costs of suit, including attorneys' fees actually incurred, from the unsuccessful party. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the day and year first above written. ATTEST: C.N.S., Inc. - --------------------------- By: John Clement, Secretary ------------------------------- Stanley Nice, President -------------------------------- Stanley Nice, Individually -------------------------------- John Clement, Individually ATTEST: IT PARTNERS INC. /s/ Jamie Blech By: /s/ Daniel J. Klein - -------------------------- --------------------------------- Jamie Blech, Secretary Daniel J. Klein IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of the day and year first above written. ATTEST: C.N.S., Inc. /s/ John Clement - --------------------------- By: /s/ Stanley Nice John Clement, Secretary ------------------------------- Stanley Nice, President /s/ Stanley Nice -------------------------------- Stanley Nice, Individually /s/ John Clement -------------------------------- John Clement, Individually ATTEST: IT PARTNERS INC. /s/ Jamie Blech By: /s/ Daniel J. Klein - -------------------------- --------------------------------- Jamie Blech, Secretary Daniel J. Klein EX-10.5 14 FSC AGREEMENT AND PLAN OF ORGANIZATION TABLE OF CONTENTS 1. THE MERGER 5 1.1 Delivery and Filing of Articles of Merger 5 1.2 Effective Time of the Merger 5 1.3 Certificate of Incorporation 6 2. CONVERSION OF STOCK 7 2.1 Manner of Conversion 7 3. DELIVERY OF MERGER CONSIDERATION; CLOSING AND POST-CLOSING ADJUSTMENTS 8 3.1 Delivery of Initial Merger Consideration 8 3.2 Delivery of Subsequent Merger Consideration 8 3.3 Closing Date Adjustments to Merger Consideration 9 3.4 Post-Closing Adjustments to Merger Consideration 9 4. CLOSING 10 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS 11 5.1 Due Organization 11 5.2 Authorization 12 5.3 Capital Stock of the COMPANY 12 5.4 Subsidiaries 12 5.5 Financial Statements 12 5.6 Liabilities and Obligations 13 5.7 Accounts and Notes Receivable 13 5.8 Intellectual Property; Permits and Intangibles 14 5.9 Environmental Matters 15 5.10 Personal Property 17 5.11 Significant Customers: Material Contracts and Commitments 17 5.12 Real Property 19 5.13 Insurance 19 5.14 Compensation: Employment Agreements: Organized Labor Matters 19 5.15 Employee Plans 20 5.16 Compliance with ERISA 20 5.17 Conformity with Law; Litigation 22 5.18 Taxes 22 5.19 No Violations 25 5.20 Business Conduct 25 5.21 Prohibited Activities 27 5.22 Misrepresentation 27 5.23 Authority; Ownership 27 5.24 No Intention to Dispose of ITP Stock 27 6. REPRESENTATIONS OF ITP AND NEWCO 28 6.1 Due Organization 28 6.2 Authorization 28 6.3 Transaction Not a Breach 28 6.4 Misrepresentation 29 6.5 Capital Stock 29 6.6 Subsidiaries 29 6.7 Conformity with Law; Litigation 29 6.8 Financial Statements 30 6.9 Compensation; Employment Agreements: Organized Labor Matters 30 7. COVENANTS PRIOR TO CLOSING 31 7.1 Access and Cooperation: Due Diligence 31 7.2 Conduct of Business Pending Closing 31 7.3 Prohibited Activities 32 7.4 No Shop 33 7.5 Termination of Related Party Agreements 34 7.6 Notification of Certain Matters 34 7.7 Amendment of Schedules 34 7.8 Further Assurances 35 7.9 Approval of Merger Agreement 35 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY 35 8.1 Representations and Warranties 36 8.2 Performance of Obligations 36 8.3 No Litigation 36 8.4 Opinion of Counsel 36 8.5 Consents and Approvals 36 8.6 Good Standing Certificates 36 8.7 Secretary's Certificate 37 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO 37 9.1 Representations and Warranties 37 9.2 Performance of Obligations 37 9.3 No Litigation 37 9.4 Secretary's Certificate 37 9.5 No Material Adverse Change 38 9.6 STOCKHOLDERS' Release 38 9.7 Termination of Related Party Agreements 38 9.8 Opinion of Counsel 38 9.9 Consents and Approvals 38 9.10 Good Standing Certificates 38 9.11 Employment Agreements 39 9.12 Stockholders' Agreement 39 9.13 Subordination Agreement 39 9.14 Financing 39 10. COVENANTS AFTER CLOSING 39 10.1 Preparation and Filing of Tax Returns 39 10.2 Subsequent Acquisitions 40 10.3 Stock Options 40 11. INDEMNIFICATION 40 11.1 General Indemnification by the STOCKHOLDERS 40 11.2 Indemnification by ITP 41 11.3 Third Person Claims 41 11.4 Exclusive Remedy 42 11.5 Limitations on Indemnification 42 12. TERMINATION OF AGREEMENT 43 12.1 Termination 43 12.2 Liabilities in Event of Termination 43 13. NONCOMPETITION 43 13.1 Prohibited Activities 43 13.2 Damages 44 13.3 Reasonable Restraint 45 13.4 Severability, Reformation 45 13.5 Independent Covenant 45 13.6 Materiality 45 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF ITP AND NEWCO ANNEX III MERGER CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCKHOLDERS AND STOCK OWNERSHIP OF ITP ANNEX VI FORM OF OPINION OF COUNSEL TO ITP ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT ANNEX IX FORM OF JOINDER AGREEMENT ANNEX X FORM OF PROMISSORY NOTE ANNEX XI FORM OF SUBORDINATION AGREEMENT AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (this "Agreement") is made, as of October 20, 1997, by and among (i) IT PARTNERS, INC., a Delaware corporation ("ITP"), (ii) ITP NO. 4, INC., a Delaware corporation ("NEWCO"), (iii) FINANCIAL SYSTEMS CONSULTING, INC., a California corporation (the "COMPANY"), and (iv) CHARLES SCHAEFFER and GARRETT SCHAEFFER (collectively, the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on July 23, 1997, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of ITP; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that the COMPANY merge with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and California (the "Merger"), and in furtherance thereof have approved the Merger; WHEREAS, unless the context otherwise requires, capitalized terms used in this Agreement or in any schedule attached hereto and not otherwise defined herein shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any subsidiary and any member of a Relevant Group. "Acquisition Companies" means NEWCO and each of the other Delaware companies wholly-owned by ITP prior to the Closing Date. "Acquisition Transaction" has the meaning set forth in Section 7.4. "Affiliate" means any other person or entity that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with a person. "Agent" has the meaning set forth in Section 9.14. "Articles of Merger" means those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such changes therein as may be required by applicable state laws. "Balance Sheet" means the COMPANY's audited August 31, 1997 Balance Sheet prepared by ITP's independent accountants, Arthur Andersen, L.L.P. and delivered to the COMPANY. "Balance Sheet Date" means August 31, 1997. "Benefit Plan" means any Plan existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the COMPANY, any ERISA Affiliate, or any predecessor of any of the foregoing, under which any employee or former employee of the COMPANY, or any beneficiary thereof, is covered, is eligible for coverage or has benefit rights. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" means the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Debt" means all liabilities of the COMPANY as determined under GAAP except (i) ordinary course trade payables and (ii) ordinary course accrued liabilities. "EBITDA" means earnings before interest, taxes, depreciation and amortization prepared in accordance with GAAP. "Effective Time of the Merger" means the time as of which the Merger becomes effective, which the parties hereto contemplate will occur on the Closing Date. "Environmental Requirements" has the meaning set forth in Section 5.9(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any Person who is, or at any time was, a member of a controlled group (within the meaning of Section 412(n)(6) of the Code) that includes, or at any time included, the COMPANY or any predecessor of the COMPANY. "Estimated Closing Date Balance Sheet" means a Closing Date balance sheet for the COMPANY prepared by ITP in accordance with Section 3.3. "Expiration Date" has the meaning set forth in Section 5(A). "Final Closing Balance Sheet" means the Closing Date Balance Sheet as finally determined under "Section 3.3. "Final Net Asset Value" means Net Asset Value as finally determined under Section 3.4. "GAAP" means generally accepted accounting principles of the United States applied in a manner consistent with the past practices of the COMPANY. "Governmental Authority" means any governmental, regulatory or administrative body, agency, subdivision or authority, any court or judicial authority, or any public, private or industry regulatory authority, whether national, Federal, state, local or otherwise. "Hazardous Materials" has the meaning set forth in Section 5.9(a). "Intellectual Property" means trademarks, service marks, trade dress, trade names, patents and copyrights and any registration or application for any of the foregoing, and any trade secret, invention, discovery, method of doing business, process, know-how, including but not limited to, training techniques, training materials, computer software (including source and object code), databases, technology systems and integration techniques, product design and product packaging. "ITP" has the meaning set forth in the first paragraph of this Agreement. "ITP Charter Documents" has the meaning set forth in Section 6.1. "ITP Expiration Date" has the meaning set forth in Section 6. "ITP Stock" means the common stock, par value $.01 per share, of ITP. "Knowledge," "best of knowledge," "aware', or similar expressions mean only the actual knowledge of the individual to which the expression is applicable. When such terms are used in connection with the knowledge of a corporate entity, such knowledge shall include only the actual knowledge of the officers or directors of that corporate entity. "Lien" has the meaning set forth in Section 5.6. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Contract" means any lease, instrument, agreement, license or permit set forth on Schedule 5.8, 5.9, 5.10, 5.11, 5.12, 5.14 or 5.15 or any other material agreement to which the COMPANY is a party or by which its properties are bound. "Merger" means the merger of the COMPANY with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and California. "Net Asset Value" means the COMPANY's net worth shown in the Estimated Closing Date Balance Sheet and the Proposed Final Balance Sheet. "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of NEWCO. "Note" has the meaning set forth in Section 2.1 (a). "NTM EBITDA" means EBITDA for the twelve months following the Closing Date. "PBGC" means the Pension Benefit Guaranty Corporation. "Person" means any natural person, corporation, partnership, proprietorship, other business organization, trust, union, association or Governmental Authority. "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Pre-Closing Date" has the meaning set forth in Section 4. "Proposed Final Closing Balance Sheet" means a Closing Date Balance Sheet for the COMPANY prepared by ITP in accordance with Section 3.4. "Relevant Group" has the meaning set forth in Section 5.18(a). "Returns" has the meaning set forth at the end of Section 5.18. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3(e). "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "Surviving Corporation" shall mean NEWCO as the surviving party in the Merger. "Tax" or "Taxes" has the meaning set forth at the end of Section 5.18. "Taxing Authority" has the meaning set forth at the end of Section 5.18. "Transfer Taxes" has the meaning set forth in Section 1 7.6(c). "Working Capital Cash Needs" means that amount of cash and cash equivalents equal to $94,690. NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGER 1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Secretary of State of the State of California and stamped receipt copies of each such filing to be delivered to ITP on or before the Closing Date. 1.2 Effective Time of the Merger. At the Effective Time of the Merger and subject to the terms and conditions of this Merger and the applicable provisions of the Delaware General Corporation Law (the "Delaware Law"), the COMPANY shall be merged with and into NEWCO in accordance with the Articles of Merger, the separate existence of the COMPANY shall cease and NEWCO shall be the Surviving Corporation in the Merger. At the Effective Time of the Merger, the effect of the Merger otherwise shall be as provided in the applicable provisions of Delaware Law and the law of the State of California. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time of the Merger, all the property, rights, privileges, powers and franchises of the COMPANY and NEWCO shall vest in the Surviving Corporation, and all debts, liabilities and duties of the COMPANY and NEWCO shall become the debts, liabilities and duties of the Surviving Corporation. The Merger will be effected in a single transaction. 1.3 Certificate of Incorporation. By-Laws and Board of Directors of Surviving Corporation. At the Effective Time of the Merger: (a) the Certificate of Incorporation of NEWCO then in effect shall be the Certificate of Incorporation of the Surviving Corporation until amended as provided by law; (b) the By-Laws of NEWCO then in effect shall be the By-Laws of the Surviving Corporation until amended as provided by law; (c) Charles Schaeffer, Daniel J. Klein and Jamie E. Blech shall be the directors of the Surviving Corporation until their respective successors are elected or appointed and qualified in accordance with the terms the By-Laws of the Surviving Corporation: the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the State of Delaware and of the Certificate of Incorporation and By-Laws of the Surviving Corporation; and (d) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger. In addition, Daniel J. Klein shall be appointed Chairman of the Board of the Surviving Corporation and Jamie E. Blech shall be appointed vice president and assistant secretary of the Surviving Corporation, each such officer to serve, subject to the provisions of the Certificate of Incorporation and By-Laws of the Surviving Corporation, until his or her successor is duly elected and qualified. (e) Subject to the provisions of the Stockholders' Agreement referred to in Section 9.12 hereof and subject to the provisions of the laws of the State of Delaware, the Company shall use its best efforts to have Charles Schaeffer nominated and appointed as a director of ITP to serve until his successor is elected and qualified. 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, ITP and NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, ITP and NEWCO as of the date of this Agreement are as follows: (a) as of the date of this Agreement, the authorized capital stock of the COMPANY is as set forth on. Schedule 1.4 hereto; (b) immediately prior to the Closing Date, the authorized capital stock of ITP will consist of ten million shares of ITP Stock and two million shares of preferred stock, par value $.01 per share ("Preferred Stock"); and (c) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which 100 shares are issued and outstanding and beneficially owned by ITP. 2. CONVERSION OF STOCK 2.1 Manner of Conversion. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) ITP Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (a) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger will be canceled and extinguished and, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent, with respect to each STOCKHOLDER, (1) the right to receive the number of shares of ITP Stock set forth on Annex III hereto with respect to such STOCKHOLDER; (2) the right to receive the amount of cash set forth on Annex III hereto with respect to such STOCKHOLDER; and (3) the right to receive a subordinated promissory note (the "Note") issued by ITP in an amount specified on Annex III hereto with respect to such STOCKHOLDER and with the terms specified in Annex X hereto and subject to a Subordination Agreement in the form attached hereto as Annex XI; (b) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of ITP Stock or other consideration shall be delivered or paid in exchange therefor; and (c) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of ITP, automatically be converted into one fully paid and non-assessable share of common stock of the Surviving Corporation, which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All ITP Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all the other shares of outstanding ITP Stock by reason of the provisions of the Certificate of Incorporation of ITP or as otherwise provided by the Delaware Law. 3. DELIVERY OF MERGER CONSIDERATION; CLOSING AND POST-CLOSING ADJUSTMENTS 3.1 (a) Delivery of Initial Merger Consideration. At the Effective Time of the Merger and on the Closing Date the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, upon surrender of such certificates and subject to the Merger Consideration Adjustments specified under Sections 3.3 and 3.4 below shall receive (i) the respective number of shares of ITP Stock set forth on Annex III-A hereto; (ii) the amount of cash set forth on Annex III-A hereto with respect to such STOCKHOLDER; and (iii) a Note issued by ITP in an amount specified on Annex III-A hereto with respect to such STOCKHOLDER and with the terms specified in Annex X hereto and subject to a Subordination Agreement in the form attached hereto as Annex XI. The cash payable pursuant to clause (ii) shall be paid by wire transfer or certified or cashier's check to the STOCKHOLDERS. (b) Certificate Delivery. The STOCKHOLDERS shall deliver in trust to Piper & Marbury L.L.P., counsel to ITP, at the Pre-Closing (as defined below) the certificates, representing all of the COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by stock powers duly endorsed in blank. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. Upon consummation of the transactions contemplated to occur on the Closing Date, all of such certificates shall be deemed released by such counsel to ITP without any further action on the part of such counsel. 3.2 Delivery of Subsequent Merger Consideration. Within 15 months after the Closing Date the STOCKHOLDERS, upon presentation of financial statements accompanied by a report of ITP's accountants demonstrating that the NTM EBITDA exceeds $1,437,500 and subject to the Merger Consideration Adjustments specified under Sections 3.3 and 3.4 below shall receive (i) the respective number of shares of ITP Stock set forth on Annex III-B hereto; (ii) the amount of cash set forth on Annex III-B hereto with respect to such STOCKHOLDER; and (iii) a Note issued by ITP in an amount specified on Annex III-B hereto with respect to such STOCKHOLDER and with the terms specified in Annex X hereto and subject to a Subordination Agreement in the form attached hereto as Annex XI. The cash payable pursuant to clause (ii) shall be paid by wire transfer or certified or cashier's check to the STOCKHOLDERS. 3.3 Closing Date Adjustments to Merger Consideration. On the Closing Date, ITP, with the assistance of the STOCKHOLDERS, will deliver to the STOCKHOLDERS an Estimated Closing Date Balance Sheet showing (i) estimated Debt, (ii) Net Asset Value, and (iii) estimated cash and cash equivalents on hand at the COMPANY, in each case as of the Closing Date. The amount of cash payable shown on Annex III shall be (x) reduced by an amount equal to any Debt and (y) increased, or decreased, as the case may be, by the positive or negative difference between (i) (aa) cash and cash equivalents and (bb) Working Capital Cash Needs; and (ii) (aa) Net Asset Value and (bb) $354,000 (the "Estimated Net Asset Value at December 31, 1996"). If the net amount of the adjustment specified in this Section 3.3 results in a reduction in the Merger Consideration in excess of the cash shown on Annex III, such excess shall reduce the principal amount of the Notes described under Annex III. Any increase or decrease in Merger Consideration under this Section 3.3 shall apply ratably to the STOCKHOLDERS in proportion to their ownership of COMPANY Stock as shown on Annex IV. 3.4 Post-Closing Adjustments to Merger Consideration. (a) As promptly as practicable, and in any event not more than 90 days following the Closing Date, ITP, together with its accountants, shall prepare and deliver to STOCKHOLDERS' accountants a Proposed Final Closing Balance Sheet prepared on a basis consistent with the Balance Sheet. The Proposed Final Closing Balance Sheet shall include an evaluation of the actual amount of the Net Asset Value at December 31, 1996. The Proposed Final Closing Balance Sheet shall be accompanied by a report of ITP's accountants. The STOCKHOLDERS and STOCKHOLDERS' accountants shall have the right to consult during reasonable business hours with appropriate personnel of ITP and ITP's accountants and to have access to, and to review and make copies of, the work papers of ITP and ITP's accountants with respect to the preparation of the Proposed Closing Balance Sheet. (b) (i) The STOCKHOLDERS may dispute the Proposed Final Closing Balance Sheet prepared by ITP and ITP's accountants by notice to ITP setting forth in reasonable detail the amounts in dispute and the basis for such dispute within 45 days of its receipt of the Proposed Final Closing Balance Sheet. If the STOCKHOLDERS fail to deliver a notice of objections within such 45-day period, the STOCKHOLDERS shall be deemed to have accepted the Proposed Final Closing Date Balance Sheet and the Net Asset Value thereon. (ii) If the amount is in dispute, ITP's accountants and the STOCKHOLDERS' accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within 15 days of the date of receipt by ITP of a written notice of dispute, ITP and the STOCKHOLDERS shall, within five additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within 30 days of each submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. Such resolution shall be within the range of amounts proposed by ITP's accountants and the amount proposed by the STOCKHOLDERS' accountants as to each disputed item. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by ITP and the STOCKHOLDERS in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. that is unsuccessfully disputed by each party (as finally determined by Coopers & Lybrand, L.L.P.) bears to the total amount of the disputed items as submitted to Coopers & Lybrand, L.L.P. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver a Final Closing Balance Sheet and a certification of the Final Net Asset Value thereon. (c) If the Final Net Asset Value is less than the net amount of Net Asset Value shown on the Estimated Closing Date Balance Sheet, the STOCKHOLDERS shall pay to ITP the difference plus interest thereon from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the then prime rate of Citibank. If the Final Net Asset Value is greater than the net amount of Net Asset Value shown on the Estimated Closing Date Balance Sheet, ITP shall pay to the STOCKHOLDERS the difference, plus interest on such amount from the Closing Date through the date of payment at a rate per annum, equal to the then prime rate of Citibank. Such payment shall be made in immediately available funds not later than two business days after the determination of the Final Net Asset Value by written transfer to a bank account designated by the party entitled to receive the payment. 4. CLOSING At or prior to the Pre-Closing (as defined below), the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law, the advance filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 2 hereof; provided, that such actions shall not include the actual completion of the Merger for purposes of this Agreement or the conversion and delivery of the shares and transmission of funds by wire referred to in Section 3 hereof, which actions shall only be taken upon the Closing Date as herein provided. If there is no Closing Date and this Agreement terminates, ITP hereby covenants and agrees to do all things required by Delaware Law and all things which counsel for the COMPANY advise ITP are required by applicable laws of the State of California in order to rescind any merger or other actions effected by the advance filing of the Articles of Merger as described in this Section. The taking of the actions described in clauses (i) and (ii) above (the "Pre-Closing") shall take place on the date which is mutually agreeable to the COMPANY and ITP (the "Pre- Closing Date") at the offices of Piper & Marbury L.L.P., Charles Center South, 36 South Charles Street, Baltimore, Maryland 21201, or upon consent of the parties, via facsimile and overnight courier. On the Closing Date (x) the Articles of Merger shall be or shall have been filed with the appropriate state authorities so that they shall be or, as of 11:00 a.m. Eastern Time on the Closing Date, shall become effective and the Merger shall thereby be effected, and (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, issuance of the Note, and the transmission of funds by wire pursuant to Section 3 hereof shall occur. The date on which the actions described in the preceding clauses (x) and (y) occur shall be referred to as the "Closing Date." 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) Representations and Warranties of the COMPANY and the STOCKHOLDERS. Each of the COMPANY and each of the STOCKHOLDERS jointly and severally represents and warrants to ITP and NEWCO that all of the following representations and warranties in this Section 5 are true at the date of this Agreement and, subject to Section 7.7 hereof, shall be true at the time of the Pre-Closing and the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of 18 months (the last day of such period being the "Expiration Date"), except that the representations and warranties set forth in Sections 5.9 and 5.18 hereof shall survive until such time as the applicable statute of limitations period has run, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its subsidiaries, if any. 5.1 Due Organization. The COMPANY is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted, to own or hold under lease the properties and assets it now owns or holds under lease, and to perform all of its obligations under the Material Contracts; is duly qualified in the jurisdictions listed in Schedule 5.1 and there are no other jurisdictions in which the conduct of the COMPANY's business or activities or its ownership of assets requires any other qualification under applicable law, the absence of which would have a materially adverse effect on the COMPANY's business, condition (financial or other), properties, business prospects or results of operations taken as a whole (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). True, complete and correct copies of the Certificate, Deed, or Articles of Incorporation and By-Laws, each as amended, of the COMPANY (the "Charter Documents") are all attached to Schedule 5.1. The minute books and stock records of the COMPANY, as heretofore made available to ITP, are correct and complete in all material respects. 5.2 Authorization. The representatives of the COMPANY executing this Agreement have the authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the COMPANY and performance by the COMPANY of its obligations under this Agreement and the consummation by the COMPANY of the transactions contemplated hereby have been duly authorized by all necessary corporate action in accordance with applicable law and the Articles of Incorporation and By Laws of the COMPANY on the part of the COMPANY and the STOCKHOLDERS. This Agreement constitutes the valid and binding obligation of the COMPANY, enforceable in accordance with its terms. 5.3 Capital Stock of the COMPANY. The entire authorized capital stock of the COMPANY is as set forth in Schedule 1.4. All of the issued and outstanding shares of capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Except as disclosed on Schedule 5.3, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements to which the COMPANY or the STOCKHOLDERS is a party requiring or restricting issuance, sale or transfer of any equity securities of the COMPANY or any securities convertible directly or indirectly into equity securities of the COMPANY, or evidencing the right to subscribe for any equity securities of the COMPANY, or giving any person any rights with respect to the capital stock of the COMPANY. Except as contemplated by this Agreement or disclosed on Schedule 5.3, there are no voting agreements, voting trusts, other agreements (including cumulative voting rights), commitments or understandings with respect to the capital stock of the COMPANY. All of the issued and outstanding shares of capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, and are owned of record and beneficially by the STOCKHOLDERS. 5.4 Subsidiaries. Schedule 5.4 attached hereto lists the name of each of the COMPANY's subsidiaries and sets forth the number and class of the authorized capital stock of each of the COMPANY's subsidiaries and the number of shares of each of the COMPANY's subsidiaries which are issued and outstanding, all of which shares (except as set forth on Schedule 5.4) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.4, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity, nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.5 Financial Statements. The COMPANY has delivered to ITP copies of the following financial statements (collectively, the "Financial Statements"): (a) Balance Sheets and Income Statements at and for the years ended December 31,1995 and 1996: and (b) Balance Sheets and Income Statements at and for the interim period ended August 31, 1997. Each of the Financial Statements is consistent with the books and records of the COMPANY (which, in turn, are accurate and complete in all material respects) and fairly presents the COMPANY's financial condition, assets and liabilities as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, consistently applied among the periods which are the subject of the Financial Statements, except unaudited interim financial statements which were or are subject to normal year-end adjustments which were not and are not expected to be material in amount and the addition of required footnotes thereto. 5.6 Liabilities and Obligations. The COMPANY's assets, tangible or intangible, are owned by the COMPANY free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities and charges of any kind (each, a "Lien"), except for purchase money security interests created in the ordinary course of business. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.6) as of the Balance Sheet Date of (i) all liabilities of the COMPANY in excess of $l0,000 which are not reflected on the balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the COMPANY Financial Statements at the Balance Sheet Date and (ii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements to which the COMPANY is a party. Except as set forth on Schedule 5.6, since the Balance Sheet Date the COMPANY has not incurred any liabilities in excess of $10,000 of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. 5.7 Accounts and Notes Receivable. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.7) of the accounts and notes receivable of the COMPANY as of the Balance Sheet Date. Within ten (l0) days prior to Closing, the COMPANY shall provide ITP (x) an accurate list of all outstanding receivables obtained subsequent to the Balance Sheet Date and as of a date which is within ten (l0) calendar days of the Closing Date and (y) an aging of all such accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.7, the accounts, notes and other receivables shown on Schedule 5.7 and on the A/R Aging Reports are and shall be, and the COMPANY has no reason to believe that any such account receivable is not or shall not be, collectible in the amounts shown net of reserves reflected in the balance sheet as of the Balance Sheet Date. 5.8 Intellectual Property; Permits and Intangibles. (a) The COMPANY owns or has valid licenses to all Intellectual Property required for or otherwise used in connection with the conduct of its business and the COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.8(a)) of all Intellectual Property owned or or used by the COMPANY including a list of all licenses and sublicenses granted by or to the COMPANY with respect to any Intellectual Property. To the COMPANY's knowledge, each item of Intellectual Property owned by or licensed to the COMPANY is valid and in full force and effect. Except as set forth on Schedule 5.8(a), all right, title and interest in and to each item of Intellectual Property owned by or licensed to the COMPANY is not subject to any restriction, royalty or fee arrangement or pending or threatened claim or dispute. To the COMPANY's knowledge, none of the Intellectual Property owned by or licensed to the COMPANY nor any product sold or licensed or service provided by the COMPANY, infringes any Intellectual Property right of any other person or entity and to the COMPANY's knowledge, no Intellectual Property owned by or licensed to the COMPANY is infringed upon by any other person or entity. (b) The COMPANY holds all licenses, franchises, permits and governmental authorizations the absence of any of which could have a Material Adverse Effect, and the COMPANY has delivered to ITP an accurate list and summary description (which is set forth on Schedule 5.8(b)) of all such licenses, franchises, permits and other governmental authorizations, including permits, licenses, franchises and certificates (a list of all environmental permits and other environmental approvals is set forth on Schedule 5.9). To the COMPANY's knowledge, the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.8(b) and 5.9 are valid and in effect, and the COMPANY has not received any notice that any Governmental Authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. To the COMPANY's knowledge, the COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.8(b) and 5.9 and is not in material violation of any of the foregoing or of any related regulatory or legal requirements except where such noncompliance or violation would not have a Material Adverse Effect. Except as specifically provided in Schedule 5.8(a) or 5.8(b), the transactions contemplated by this Agreement will not (i) result in the infringement or misappropriation by the COMPANY of any Intellectual Property right of any other person or entity, or (ii) result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any licenses, franchises, permits or government authorizations listed on Schedule 5.8(b) or any contracts involving the grant to the COMPANY of any rights relating to the Intellectual Property of any third party. (c) To the COMPANY's knowledge, the COMPANY's products and services conform to all material respects with any material applicable specification, documentation, performance standard, or contractual commitment by the COMPANY existing with respect thereto, and there are no unresolved material claims under warranty, contract or otherwise with respect to the COMPANY's services or products. 5.9 Environmental Matters. (a) (i) "Environmental Requirements" for purposes of this Agreement shall mean all applicable federal, state and local laws, rules, regulations, ordinances and requirements relating to Hazardous Materials (as defined below), pollution, or protection of the environment, health or safety, all as amended or hereafter amended. (ii) "Hazardous Materials" for purposes of this Agreement shall include, without limitation: (A) hazardous materials, hazardous substances, extremely hazardous substances, hazardous chemicals, toxic chemicals, toxic substances, pollutants, contaminants, solid wastes or hazardous wastes, as those terms are defined or used in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. sec.9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. sec. 6901 et seq.("RCRA"), the Clean Water Act, 33 U.S.C. sec. 1251 et seq., the Clean Air Act, 42 U.S.C. sec. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. sec. 2601 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. sec. 11001 et seq., the Occupational Safety and Health Act, and any other Environmental Requirements and other terms of similar import or meaning; (B) petroleum and petroleum products, including, without limitation, crude oil or any faction thereof; (C) any radioactive material, including, without limitation, any source, special nuclear, or by- product material as defined in 42 U.S.C. Section 2011 et seq.; and (D) asbestos in any form or condition. (b) Except as set forth on Schedule 5.9, (i) the COMPANY and each of its predecessors and subsidiaries are and at all times have been in compliance in all material respects with, and are not and have not been in violation of or liable under, all Environmental Requirements; (ii) the COMPANY and each of its predecessors and subsidiaries possess all permits, licenses and certificates required by all Environmental Requirements, and have filed all notices or applications required thereby; (iii) no environmental clearances, approvals or consents are required under applicable law from any Governmental Authority or entity in order to consummate the transactions contemplated in this Agreement or for the COMPANY to continue operations after the Closing Date; (iv) (A) the COMPANY and each of its predecessors and subsidiaries have not been subject to, or received any notice of any private, administrative or judicial claim or action, or notice of any intended private, administrative or judicial claim or action or received any request for information relating to the presence or alleged presence of Hazardous Materials (1) in, under or upon any real property currently or formerly owned, leased, operated or used by (a) the COMPANY or any of its predecessors or subsidiaries or (b) any other person that has, at any time, disposed of Hazardous Materials on behalf of the COMPANY or any of its predecessors or subsidiaries; or (2) ever possessed, owned or generated by or on behalf of the COMPANY or any of its predecessors or subsidiaries at any location; (B) there is no basis for any such notice, claim, action or request; and (C) there are no pending or, to the knowledge of the COMPANY and each of its predecessors and subsidiaries, threatened claims, actions or proceedings (or notices of potential claims, actions or proceedings) from any Governmental Authority or any other entity regarding any matter relating to health, safety or protection of the environment against the COMPANY or any of its predecessors and subsidiaries. (v) There are and have been no past or present events, conditions, circumstances, activities, practices, incidents or actions which materially interfere with or prevent continued compliance by the COMPANY or the Surviving Corporation with any Environmental Requirements, give rise to any legal obligation or liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation against or involving the COMPANY or any real property presently or previously owned or used by the COMPANY under any Environmental Requirements or related common law theories: (vi) No real property currently or formerly owned or operated by the COMPANY or any of its predecessors or subsidiaries is or was listed on the National Priorities List, the CERCLIS or any similar state or local list of potential or confirmed hazardous waste sites; (vii) To the COMPANY's knowledge, no conditions exist on adjacent properties that threaten the environmental condition or safety of any property owned, operated or used by the COMPANY; and (viii) The COMPANY and its predecessors and subsidiaries have not released or disposed of any Hazardous Materials at any property owned or used by the COMPANY or its predecessors or subsidiaries and, to the COMPANY's knowledge, no other person has released or disposed of Hazardous Materials at any such property. 5.10 Personal Property. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.10) of (x) all personal property with a fair market value in excess of $10,000 which is included (or that will be included) in "depreciable plant, property and equipment" (or similarly named line item) on the balance sheet of the COMPANY as of the Balance Sheet Date, (y) all other personal property owned by the COMPANY with a value individually in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property, including, in the case of each of (x), (y) and (z), true, complete and correct copies of all such leases which have been provided to ITP's counsel. Except as set forth on Schedule 5.10, (i) all personal property with a value individually in excess of $10,000 used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.10, (ii) all of the personal property listed on Schedule 5.10 is in good working order and condition, ordinary wear and tear excepted, and (iii) all leases and agreements included on Schedule 5.10 are in full force and effect and constitute valid and binding agreements of the COMPANY, and to the COMPANY's knowledge, of the other parties thereto in accordance with their respective terms. 5.11 Significant Customers: Material Contracts and Commitments. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.11) of all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.11, means a customer (or person or entity) representing 5% or more of the COMPANY's total annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.1 1, none of the COMPANY's significant customers has canceled or substantially reduced or, to the knowledge of the COMPANY, is currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. Except as listed or described on Schedule 5.11, as of or on the date hereof, neither the COMPANY is a party to or bound by, nor do there exist any, Contracts relating to or in any way affecting the operation or ownership of the COMPANY's business that are of a type described below: (a) any collective bargaining arrangement with any labor union or any such agreement currently in negotiation or proposed; (b) any contract for capital expenditures or the acquisition or construction of fixed assets for or in respect to real property other than in the COMPANY's ordinary course of business in excess of $10.000: (c) any contract with a term in excess of one year for the purchase, maintenance, acquisition, sale or furnishing of materials, supplies, merchandise, machinery, equipment, parts or other property or services (except that the COMPANY need not list any such contract made in the ordinary course of business) which requires aggregate future payments of greater than $10,000; (d) any contract relating to the borrowing of money, or the guaranty of another person's borrowing of money, including, without limitation, all notes, mortgages, indentures and other obligations, agreements and other instruments for or relating to any lending or borrowing, including assumed indebtedness; (e) any contract granting any person a lien on any of the assets of the COMPANY, in whole or in part; (f) any contract granting to any person a first-refusal, first- offer or similar preferential right to purchase or acquire any of the assets of the COMPANY's business other than in the ordinary course of business; (g) any contract under which the COMPANY is (i) a lessee or sublessee of any machinery, equipment, vehicle or other tangible personal property or real property, or (ii) a lessor of any real property or tangible personal property owned by the COMPANY. in either case having an original value in excess of $10,000; (h) any contract providing for the indemnification of any officer, director, employee or other person; (i) any joint venture or partnership contract; and (j) any other contract with a term in excess of one year, whether or not made in the ordinary course of business, which involves or may involve payments in excess of $10,000. The COMPANY has provided ITP with a true and complete copy of each written Material Contract, including all amendments or other modifications thereto. Except as set forth on Schedule 5.11, each Material Contract is a valid and binding obligation of the COMPANY, enforceable in accordance with its terms, and is in full force and effect. Except as set forth on Schedule 5.11, the COMPANY has performed in all material respects all obligations required to be performed by it under each Material Contract and neither the COMPANY nor, to the knowledge of the COMPANY, any other party to any Material Contract, is (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect thereunder; and there exists no condition which would constitute a breach or default thereunder. The COMPANY has not been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise. 5.12 Real Property. (a) The COMPANY owns no real property. (b) Schedule 5.12(b) includes an accurate list of real property leases to which the COMPANY is a party. Counsel to ITP has been provided with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY. Except as set forth on Schedule 5.12(b), all of such leases included on Schedule 5.12(b) are in full force and effect and constitute valid and binding agreements of the COMPANY and, to the COMPANY's knowledge, of the parties thereto in accordance with their respective terms. 5.13 Insurance. The COMPANY has delivered to ITP: (a) true and complete copies of all policies of insurance to which the COMPANY is a party or under which the COMPANY, or any director of the COMPANY, is or has been covered at any time within two years preceding the date of this Agreement; (b) true and complete copies of all pending applications for policies of insurance; and (c) any statement by the auditor of the COMPANY's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. 5.14 Compensation: Employment Agreements; Organized Labor Matters. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.14) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation of each of such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to ITP true, complete and correct copies of any employment agreements for persons listed on Schedule 5.14. Since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices. Except as set forth on Schedule 5.14, there is no, and within the last three years the COMPANY has not experienced any, strike, picketing, boycott, work stoppage or slowdown, other labor dispute, union organizational activity, allegation, charge or complaint of unfair labor practice, employment discrimination or other matters relating to the employment of labor, pending or, to the COMPANY's knowledge, threatened against the COMPANY. 5.15 Employee Plans. The COMPANY has delivered to ITP an accurate schedule (which is set forth on Schedule 5. 15) showing all Benefit Plans, together with true, complete and correct copies of such Benefit Plans, agreements and any trusts related thereto, summary plan descriptions thereof, the last determination letter (if any) issued to each Benefit Plan by the Internal Revenue Service, and the last three Forms 5500 filed for such Benefit Plans. 5.16 Compliance with ERISA. (a) All Benefit Plans that are intended to qualify under Section 401(a) of the Code are and have been so qualified and have been determined by the Internal Revenue Service to be so qualified. (b) Except as disclosed on Schedule 5.16, all reports and other documents required to be filed with any Governmental Authority or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audits or tax returns) have been timely filed or distributed. (c) None of the STOCKHOLDERS, any such Benefit Plan, nor the COMPANY has engaged in any transactions prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA. (d) No material pending claim or lawsuit has been asserted or instituted by or against a Benefit Plan, against the assets of a trust under a Benefit Plan or by or against the plan sponsor, plan administrator, or any fiduciary of a Benefit Plan (other than routine claims for benefits), and the COMPANY has no knowledge of any fact which could form the basis for any such claim or lawsuit. (e) Each Benefit Plan (including without limitation a Benefit plan covering retirees or their beneficiaries) may be terminated or amended by the plan sponsor at any time without the consent of any person covered thereunder and may be terminated without any liability for benefits accruing after the date of such termination. (f) No Benefit Plan has any provisions that would prohibit the transactions contemplated by this Agreement or give rise to any severance, termination or other payments or liabilities (including without limitation any acceleration in benefits vesting or distribution) as a result of the transactions contemplated by this Agreement. (g) There have been no terminations, partial terminations or discontinuance of contributions to any Benefit Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service and the Pension Benefit Guaranty Corporation. (h) All Benefit Plans and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA, the Code and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. (i) All accrued contribution obligations or the COMPANY with respect to any Benefit Plan have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. (j) The COMPANY further represents that, with respect to Benefit Plans subject to Title IV of ERISA: (a) no Benefit Plan has incurred an accumulated funding deficiency, as defined in Section 412(a) of the Code and Section 302(1) of ERISA and no event has occurred or circumstance exists which may result in an accumulated funding deficiency as of the last day of the current plan year for any Benefit Plan; (b) the benefit liabilities of each Benefit Plan (as defined in Section 4001(a)(16) of ERISA), calculated using the actuarial assumptions that would be used by the Pension Benefit Guaranty Corporation in the event of plan termination, do not exceed the fair market value of plan assets; (c) there have been no "reportable events" (as that phrase is defined in Section 4043 of ERISA and regulations thereunder) with respect to any Benefit Plan, other than events with respect to which the 30 days' notice requirement has been waived; (d) the COMPANY and its ERISA Affiliates have not incurred liability under Section 4062, 4063 or 4064 of ERISA with respect to any Benefit Plan; (e) no circumstances exist pursuant to which the COMPANY could have any direct or indirect liability whatsoever (including, but not limited to, any liability to any multiemployer plan or the PBGC under Title IV of ERISA or to the Internal Revenue Service for any excise tax or penalty, or being subject to any statutory lien to secure payment of any such liability) with respect to any Benefit Plan now or heretofore maintained or contributed to by any ERISA Affiliate; and (f) the COMPANY is not now, nor can it as a result of its past activities become, liable to the PBGC or to any Benefit Plan that is a multiemployer employee pension benefit plan as defined in Section 3(37) of ERISA; and 5.17 Conformity with Law; Litigation. Except as set forth on Schedule 5.17, the COMPANY has complied with all laws, rules, regulations, writs, injunctions, decrees, and orders applicable to it or to the operation of its Business (collectively, "Laws") and has not received any notice of any alleged claim or threatened claim, violation of, liability or potential responsibility under, any such Law which has not heretofore been cured and for which there is no remaining liability other than, in each case, those not having a Material Adverse Effect. Except to the extent set forth on Schedule 5.17 (which shall disclose the parties to, nature of, and relief sought for each matter disclosed): (a) There is no suit, action, proceeding, investigation, claim or order pending or, to the COMPANY's knowledge, threatened against either the COMPANY or, to the knowledge of the COMPANY, pending or threatened against any of the officers, directors or employees of the COMPANY with respect to its business or proposed business activities which would have a Material Adverse Effect on the COMPANY, or to which the COMPANY is otherwise a party, before any court, or before any Governmental Authority (collectively, "Claims"). (b) The COMPANY is not subject to any judgment, order or decree of any court or Governmental Authority; the COMPANY has not received any opinion or memorandum from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business. The COMPANY is not engaged in any legal action to recover monies due it or for damages sustained by it. 5.18 Taxes. Except as set forth on Schedule 5.18: (a) All Returns required to have been filed by or with respect to the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member (a "Relevant Group") with any Taxing Authority have been duly filed, and each such Return correctly and completely reflects the Tax liability and all other information required to be reported thereon. All Taxes (whether or not shown on any Return) owed by the COMPANY, any subsidiary and any member of a Relevant Group (individually, the "Acquired Party" and collectively, the "Acquired Parties") have been paid on or prior to the due date for payment of such Taxes. (b) To the knowledge of the COMPANY and the STOCKHOLDERS, the provisions for Taxes due by the COMPANY and any subsidiaries (as opposed to any reserve for deferred Taxes established to reflect timing differences between book and Tax income) in the COMPANY Financial Statements are sufficient for all unpaid Taxes, being current taxes not yet due and payable, of such Acquired Party. (c) No Acquired Party is a party to any agreement extending the time within which to file any Return. No claim has ever been made by any Taxing Authority in a jurisdiction in which an Acquired Party does not file Returns that it is or may be subject to taxation by that jurisdiction that is unresolved or if adversely determined would have a Material Adverse Effect on such Acquired Party. (d) Each Acquired Party has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. (e) No Acquired Party expects any Taxing Authority to assess any additional Taxes against or in respect of it for any past period. There is no dispute or claim concerning any Tax liability of any Acquired Party either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to any Acquired Party. No issues have been raised in any examination by any Taxing Authority with respect to any Acquired Party which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. Schedule 5.18 attached hereto lists all federal, state, local and foreign income Tax Returns filed by or with respect to any Acquired Party for all taxable periods ended on or after January 1, 1991, indicates those Returns, if any, that have been audited, and indicates those Returns that currently are the subject of audit. Each Acquired Party has delivered to ITP complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, such Acquired Party since January 1, 1991. (f) No Acquired Party has waived any statute of limitations, the waiver of which remains in effect on the date hereof, in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. (g) No Acquired Party has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could require it to make any payments, that are not deductible under Section 280G of the Code. (h) No Acquired Party is a party to any Tax allocation or sharing agreement. (i) None of the assets of any Acquired Party constitutes tax- exempt bond financed property or tax-exempt use property, within the meaning of Section 168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is subject to the provisions of Section 1 68(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any "long-term contract" within the meaning of Section 460 of the Code. (j) No Acquired Party is a "consenting corporation" within the meaning of Section 341 (f)(1) of the Code, or comparable provisions of any state statutes, and none of the assets of any Acquired Party is subject to an election under Section 341 (f) of the Code or comparable provisions of any state statutes. (k) No Acquired Party is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes. (l) There are no accounting method changes or proposed or threatened accounting method changes, of any Acquired Party that could give rise to an adjustment under Section 481 of the Code for periods after the Closing Date. (m) No Acquired Party has received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. (n) Each Acquired Party has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662(d) of the Code. (o) No Acquired Party has any liability for Taxes of any person other than such Acquired Party (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise. (p) Prior to ITP's acquisition of the COMPANY pursuant to this Agreement, there currently are no limitations on the utilization of the net operating losses, built-in losses, capital losses, Tax credits or other similar items of any Acquired Party (collectively, the "Tax Losses") under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21 and Section 1.1502-21A of the Treasury regulations or (vii) Sections 1.1502-91 through 1.1502-99 of the Treasury regulations, in each case as in effect both prior to and following the Tax Reform Act of 1986. (q) The fair market value of the assets of the COMPANY as well as the COMPANY's tax basis in such assets exceeds the sum of its liabilities, plus the amount of liabilities, if any, to which the assets are subject. (r) The COMPANY is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 351 (e)(2) of the Code. For purposes of this Section 5.19, the following definitions shall apply: "Returns" means any returns, reports or statements'(including any information returns) required to be filed for purposes of a particular Tax with any Taxing Authority or Governmental Authority. "Tax" or "Taxes" means all Federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatsoever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Taxing Authority" means any Governmental Authority, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having jurisdiction with respect to any Tax. 5.19 No Violations. The COMPANY is not in violation of any Charter Document. To the knowledge of the COMPANY, except as set forth on Schedule 5.19, (a) the rights and benefits of the COMPANY under the Material Contracts will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance by the COMPANY and the STOCKHOLDERS of their obligations hereunder and the consummation by the COMPANY and the STOCKHOLDERS of the transactions contemplated hereby will not (i) result in any violation or breach of, or constitute a default under, any of the terms or provisions of the Material Contracts or the Charter Documents or (ii) require the consent, approval, waiver of any acceleration, termination or other right or remedy or action of or by, or make any filing with or give any notice to, any other party. Except as set forth on Schedule 5.19, none of the Material Contracts requires notice to, or the consent or approval of, any Governmental Authority or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any material right or benefit. 5.20 Business Conduct. Except as set forth on Schedule 5.20, since August 31, 1997, the COMPANY has conducted its business only in the ordinary course consistent with past custom and practices and has incurred no liabilities other than in the ordinary course of business consistent with past custom and practices. Except as forth on Schedule 5.20, since August 31, 1997, there has not been any: (a) Material adverse change in the COMPANY's operations, condition (financial or otherwise), operating results, assets, liabilities, employee, customer or supplier relations or business prospects; (b) Loan or advance by the COMPANY to any party other than sales to customers on credit in the ordinary course of business consistent with past custom and practices; (c) Declaration, setting aside, or payment of any dividend or other distribution in respect to the COMPANY's capital stock, any direct or indirect redemption, purchase, or other acquisition of such stock, or the payment of principal or interest on any note, bond, debt, instrument or debt to any Affiliate; (d) Incurrence of any debts, liabilities or obligations except current liabilities incurred in connection with or for services rendered or goods supplied in the ordinary course of business consistent with past custom and practices, liabilities on account of taxes and governmental charges but not penalties, interest or fines in respect thereof, and obligations or liabilities incurred by virtue of the execution of this Agreement; (e) Issuance by the COMPANY of any notes, bonds, or other debt securities or any equity securities or securities convertible into or exchangeable for any equity securities; (f) Cancellation, waiver or release by the COMPANY of any debts, rights or claims, except in each case in the ordinary course of business consistent with past custom and practices; (g) Amendment of the COMPANY's Articles or Certificate of Incorporation or By-Laws; (h) Amendment or termination of any, Material Contract, other than expiration of such contract in accordance with its terms; (i) Change in accounting principles, methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) utilized by the COMPANY; (j) Sale or assignment by the COMPANY of any tangible assets other than in the ordinary course of business; (k) Capital expenditures or commitments therefor by the COMPANY other than in the ordinary course of business in excess of $10,000 in the aggregate; (l) Liens of any asset of the COMPANY other than purchase money security interests created in the ordinary course of business; (m) Adoption, amendment or termination of any Benefit Plan; (n) Increase in the benefits provided under any Benefit Plan; or (o) An occurrence or event not included in clauses (a) through (o) that has or might be expected to have a Material Adverse Effect on the COMPANY. 5.21 Prohibited Activities. Except as set forth on Schedule 5.21, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3. 5.22 Misrepresentation. To the knowledge of the COMPANY and the STOCKHOLDERS, none of the representations and warranties set forth in this Agreement, the schedules, certificates, and the other documents furnished by the COMPANY to ITP pursuant hereto, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading. (B) Representations and Warranties of the STOCKHOLDERS. Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the date of this Agreement and, subject to Section 7.7 hereof, shall be true at the time of the Pre-Closing and on the Closing Date. 5.23 Authority; Ownership. Each STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Each STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.23, such COMPANY Stock is owned free and clear of any and all Liens, voting trusts and restrictions of every kind 5.24 No Intention to Dispose of ITP Stock. No STOCKHOLDER has any current plan or intention, or is under any binding commitment or contract to sell, exchange or otherwise dispose of shares of ITP Stock received pursuant to Section 3.1. 6. REPRESENTATIONS OF ITP AND NEWCO ITP and NEWCO jointly and severally represent and warrant to the COMPANY and the STOCKHOLDERS that all of the following representations and warranties in this Section 6 are true at the date of this Agreement and, subject to Section 7.7 hereof, shall be true at the time of the Pre-Closing and on the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of 18 months (the "ITP Expiration Date"). 6.1 Due Organization. ITP and NEWCO are each corporations duly incorporated, validly existing and in good standing under the laws of the state of their incorporation, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their business in the places and in the manner as now conducted, to own or hold under lease the properties and assets they now own or hold under lease, and to perform all of their obligations under any material agreement to which they are a party by which their properties are bound; are duly qualified in the jurisdictions listed in Schedule 6.1 and there are no other jurisdictions in which the conduct of ITP's and NEWCO's business or activities or their ownership of assets requires any other qualification under applicable law, the absence of which would have a Materially Adverse Effect on either ITP's or NEWCO's business. True, complete and correct copies of the Certificate or Articles of Incorporation and Bylaws, each as amended, of ITP and NEWCO (the "ITP Charter Documents") are all attached hereto as Annex II. The minute books and stock records of each of ITP and NEWCO, as heretofore made available to the COMPANY, are correct and complete in all material respects. 6.2 Authorization. The respective representatives of ITP and NEWCO executing this Agreement have the authority to execute and deliver this Agreement and to bind ITP and NEWCO to perform their respective obligations hereunder. The execution and delivery of this Agreement by ITP and NEWCO and the performance by ITP and NEWCO of their respective obligations under this Agreement and the consummation by ITP and NEWCO of the transactions contemplated hereby have been duly authorized by all necessary corporate action by each in accordance with applicable law and the Certificate or Articles of Incorporation and By-Laws of ITP and NEWCO, as the case may be. This Agreement constitutes the valid and binding obligation of ITP and NEWCO, enforceable in accordance with its terms. 6.3 Transaction Not a Breach. Neither the execution and delivery of this Agreement nor their performance will violate, conflict with, or result in a breach of any provision of any Law, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or any Governmental Authority binding on ITP or NEWCO or conflict with or result in the breach of any of the terms, conditions or provisions of the Certificate or Articles of Incorporation or the By-Laws of ITP or NEWCO or of any contract, agreement, mortgage or other instrument or obligation of any nature to which ITP or NEWCO is a party or by which ITP or NEWCO is bound. 6.4 Misrepresentation. To the knowledge of ITP, none of the representations and warranties set forth in this Agreement or in any of the certificates, schedules, exhibits, lists, documents, exhibits, or other instruments delivered, or to be delivered, to the COMPANY as contemplated by any provision hereof, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 6.5 Capital Stock. The entire authorized capital stock of ITP consists of ten million shares of ITP Stock and two million shares of Preferred Stock. Except as disclosed on Schedule 6.5, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements to which ITP is a party requiring or restricting issuance, sale or transfer of any equity securities of ITP or any securities convertible directly or indirectly into equity securities of ITP, or evidencing the right to subscribe for any equity securities of ITP, or giving any person any rights with respect to the capital stock of ITP. Except as contemplated by this Agreement or disclosed on Schedule 6.5, there are no voting agreements, voting trusts, other agreements (including cumulative voting rights), commitments or understandings with respect to the ITP Stock. 6.6 Subsidiaries. Schedule 6.6 attached hereto lists the name of each of ITP's and NEWCO's subsidiaries and sets forth the number and class of the authorized capital stock of each of ITP's and NEWCO's subsidiaries and the number of shares of each of ITP's and NEWCO's subsidiaries which are issued and outstanding prior to the Merger, all of which shares (except as set forth on Schedule 6.6) are owned by ITP and NEWCO as the case may be, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on schedule 6.6, ITP and NEWCO do not presently own, of record or beneficially, or control, directly or directly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity. 6.7 Conformity with Law; Litigation. Except as set forth on Schedule 6.7, ITP and NEWCO have complied with all Laws, applicable to them or to the operation of their businesses and have not received any notice of any alleged claim or threatened claim, violation of, liability or potential responsibility under, any Law which has not heretofore been cured and for which there is no remaining liability other than, in each case, those not having a Material Adverse Effect on the business, condition (financial or other), properties, business prospects or financial results of ITP or NEWCO, taken as a whole. Except to the extent set forth on Schedule 6.7 (which shall disclose to the parties the, nature of, and relief sought for each matter): (a) There is no suit, action, proceeding, investigation, claim or order pending or, to the knowledge of ITP and NEWCO, threatened against either of ITP or NEWCO or, to the knowledge of ITP and NEWCO, pending or threatened against any of the officers, directors or employees of ITP or NEWCO with respect to their businesses or proposed business activities which would have a Material Adverse Effect on ITP or NEWCO, or to which ITP or NEWCO are otherwise a party, before any court, or before any Governmental Authority. (b) ITP and NEWCO are not subject to any judgment, order or decree of any court or Governmental Authority; ITP and NEWCO have not received any opinion or memorandum from legal counsel to the effect that either is exposed, from a legal standpoint, to any liability or disadvantage which may be material to their businesses. Neither ITP nor NEWCO are engaged in any legal action to recover monies due it or them for damages sustained by either of them. 6.8 Financial Statements. ITP has delivered to the COMPANY copies of the following financial statements (collectively, the "ITP Financial Statements"): (a) Balance Sheets, Income Statements, Statements of Stockholders' Equity, and Statements of Cash Flows at and for the interim period ended August 31, 1997. Each of the ITP Financial Statements is consistent with the books and records of ITP (which, in turn, are accurate and complete in all material respects) and fairly presents ITP's financial condition, assets and liabilities as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, consistently applied among the periods which are the subject of the ITP Financial Statements, except unaudited interim financial statements which were or are subject to normal year-end adjustments which were not and are not expected to be material in amount and the addition of required footnotes thereto. 6.9 Compensation; Employment Agreements; Organized Labor Matters. ITP has delivered to the COMPANY an accurate list (which is set forth on Schedule 6.9) showing all officers, directors and key employees of ITP and the two most highly compensated employees of each of ITP's subsidiaries, listing all employment agreements with such officers, directors and key employees and the rate of compensation of each of such persons as of the date hereof. Except as set forth on Schedule 6.9, there is no, and within the last three years ITP has not experienced any, strike, picketing, boycott, work stoppage or slowdown, other labor dispute, union organizational activity, allegation, charge or complaint of unfair labor practice, employment discrimination or other matters relating to the employment of labor, pending or, to ITP's knowledge threatened against ITP. 7. COVENANTS PRIOR TO CLOSING 7.1 Access and Cooperation: Due Diligence. (a) Between the date of this Agreement and the Closing Date, the COMPANY will afford to the officers and authorized representatives of ITP access during business hours to all of the COMPANY's sites, properties, books and records and will furnish ITP with such additional financial and operating data and other information as to the business and properties of the COMPANY as ITP may from time to time reasonably request. The COMPANY will cooperate with ITP and its representatives, including ITP's auditors and counsel, in the preparation of any documents or other material which may be required in connection with the transactions contemplated by this Agreement. ITP, NEWCO, the STOCKHOLDERS and the COMPANY will treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted as confidential in accordance with the provisions of Section 14 hereof. (b) Between the date of this Agreement and the Closing Date, ITP will afford to the officers and authorized representatives of the COMPANY access during business hours to all of ITP's and NEWCO's sites, properties, books and records and will furnish the COMPANY with such additional financial and operating data and other information as to the business and properties of ITP and NEWCO as the COMPANY may from time to time reasonably request. ITP and NEWCO will cooperate with the COMPANY, its representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with the transactions contemplated by this Agreement. The COMPANY will cause all information obtained in connection with the negotiation and performance of this Agreement to be treated as confidential in accordance with the provisions of Section 14 hereof. 7.2 Conduct of Business Pending Closing. Between the date of this Agreement and the Closing Date, the COMPANY will, except as set forth on Schedule 7.2: (a) carry on its business in the ordinary course substantially as conducted heretofore and not introduce any new method of management, operation or accounting; (b) maintain its properties and facilities, including those held under leases, in as good working order and condition as at present, ordinary wear and tear excepted; (c) perform in all material respects its obligations under agreements relating to or affecting its assets, properties or rights; (d) keep in full force and effect present insurance policies or other comparable insurance coverage; (e) maintain and preserve its business organization intact and use its best efforts to retain its present key employees and relationships with suppliers, customers and others having business relations with the COMPANY; (f) maintain compliance with all permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar Governmental Authorities: (g) maintain present debt and lease instruments in accordance with their respective terms and not enter into new or amended debt or lease instruments, provided that debt and/or lease instruments may be replaced if such replacement instruments are on terms at least as favorable to the COMPANY as the instruments being replaced; and (h) except in the ordinary course of business or as required by law or contractual obligations or other understandings or arrangements existing on the date hereof, the COMPANY will not (i) increase in any manner the base compensation of, or enter into any new bonus or incentive agreement or arrangement with, any of the employees engaged in the COMPANY's business, (ii) pay or agree to pay any additional pension, retirement allowance or other employee benefit to any such employee, whether past or present, (iii) enter into any new employment, severance, consulting, or other compensation agreement with any existing employee engaged in the COMPANY's business, (iv) amend or enter into a new Plan (except as required by Law) or amend or enter into a new collective bargaining agreement (except as required by this Agreement), or (v) engage in any transaction with any Affiliates. 7.3 Prohibited Activities. Except as disclosed on Schedule 7.3 between the date hereof and the Closing Date, the COMPANY will not, without the prior written consent of ITP: (a) make any change in its Articles or Certificate of Incorporation or By-Laws; (b) grant or issue any securities, options, warrants, calls, conversion rights or commitments of any kind relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.3; (c) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding, or purchase, redeem or otherwise acquire or retire for value any shares of its stock or engage in any transaction that will significantly affect the cash reflected on the balance sheet of the COMPANY as of August 31, 1997. (d) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditure, except if it is in the ordinary course of business (consistent with past practice) or involves an amount not in excess of $10,000; (e) create, assume or permit to exist any Lien upon any assets or properties whether now owned or hereafter acquired, except (1) with respect to purchase money liens incurred in connection with the acquisition of equipment with an aggregate cost not in excess of $10,000 necessary or desirable for the conduct of the business of the COMPANY, (2) (A) Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings (and for which adequate reserves have been established and are being maintained) or (B) material men's, mechanics', workers', repairmen's, employees' or other like Liens arising in the ordinary course of business (the liens set forth in clause (2) being referred to herein as "Statutory Liens"), or (3) Liens set forth on Schedule 5.6 hereto; (f) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the ordinary course of business; (g) negotiate for the acquisition of any business or the start- up of any new business; (h) merge or consolidate or agree to merge or consolidate with or into any other corporation; (i) waive any material right or claim of the COMPANY; (j) commit a material breach of, materially amend or terminate any Material Contract; or (k) enter into any other transaction outside the ordinary course of its business or prohibited hereunder. 7.4 No Shop. In consideration of the substantial expenditure of time, effort and expense undertaken by ITP in connection with its due diligence review and the preparation and execution of this Agreement, the COMPANY and the STOCKHOLDERS agree that neither they nor their representatives, agents or employees will, after the execution of this Agreement until the earlier of (i) the termination of this Agreement or (ii) the Closing, directly or indirectly, solicit, encourage, negotiate or discuss with any third party (including by way of furnishing any information concerning the COMPANY) any acquisition proposal relating to or affecting the COMPANY or any part of it, or any direct or indirect interests in the COMPANY, whether by purchase of assets or stock, purchase of interests, merger or other transaction ("Acquisition Transaction"), and that the COMPANY will promptly advise ITP of the terms of any communications any of the STOCKHOLDERS or the COMPANY may receive or become aware of relating to any bid for all or any part of the COMPANY. 7.5 Termination of Related Party Agreements. The STOCKHOLDERS and the COMPANY shall terminate (i) any stockholders' agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee and (ii) any existing agreement between the COMPANY and any STOCKHOLDER, on or prior to the Closing Date. A list of such terminated agreements is set forth on Schedule 7.5 and copies of each such agreement have been provided to counsel for ITP. 7.6 Notification of Certain Matters. Between the date hereof and the Closing Date the STOCKHOLDERS and the COMPANY shall give prompt notice to ITP of (i) the occurrence or non-occurrence of any event of which the COMPANY or the STOCKHOLDERS have knowledge, the occurrence or non-occurrence of which, would cause any representation or warranty of the COMPANY or the STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. Between the date hereof and the Closing Date ITP and NEWCO shall give prompt notice to the COMPANY of (i) the occurrence or nonoccurrence of any event of which ITP or NEWCO have knowledge, the occurrence or non-occurrence of which, would cause any representation or warranty of ITP or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of ITP or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.6 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.7 Amendment of Schedules. (a) Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing Date to supplement or amend promptly the Schedules hereto with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules. (b) Notwithstanding the foregoing clause (a), no amendment or supplement to a Schedule prepared by the COMPANY or the STOCKHOLDERS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect, individually or cumulatively with any other events or occurrences, may be made unless ITP consents in writing to such amendment or supplement; and provided further that no amendment or supplement to a Schedule prepared by ITP or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless the COMPANY consents in writing to such amendment or supplement. In the event that the COMPANY or the STOCKHOLDERS seek to amend or supplement a Schedule pursuant to this Section 7.7 and ITP does not consent to such amendment or supplement, as provided above, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(a) hereof. In the event that ITP or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.7 and the COMPANY does not consent to such amendment or supplement, as provided above, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(a) hereof. (c) For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8 and 9 have been fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended or supplemented pursuant to this Section 7.7. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.7, except that, notwithstanding anything to the contrary contained in this Agreement, if the COMPANY or the STOCKHOLDERS on the one hand, or ITP or NEWCO on the other hand, amends or supplements a Schedule which results in a termination of this Agreement and such amendment or supplement arises out of or reflects facts or circumstances which such party knew about at the time of execution of this Agreement and knew would result in a termination of this Agreement or if such amendment or supplement otherwise is proposed in bad faith, such party shall pay or reimburse ITP or the COMPANY and the STOCKHOLDERS, as the case may be, for all of the legal, accounting and other out of pocket costs reasonably incurred in connection with this Agreement. 7.8 Further Assurances. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.9 Approval of Merger Agreement. Each of the STOCKHOLDERS agrees to vote all of his shares of the COMPANY Stock in favor of the Merger and all other transactions contemplated by this Agreement. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY The obligations of the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Pre-Closing Date and, to the extent specified in this Section 8, on the Closing Date are subject to the satisfaction or waiver on or prior to the Pre-Closing Date and/or the Closing Date, as the case may be, of all of the conditions set forth in this Section 8. 8.1 Representations and Warranties. All representations and warranties of ITP and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Pre-Closing Date and the Closing Date as though such representations and warranties had been made as of such date; and a certificate to the foregoing effect dated the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of ITP shall have been delivered to the COMPANY and the STOCKHOLDERS. 8.2 Performance of Obligations. All of the terms, covenants and conditions of this Agreement to be complied with and performed by ITP and NEWCO on or before each of the Pre-Closing Date and the Closing Date shall have been duly complied with and performed in all material respects on or before each of the Pre-Closing Date and the Closing Date, as the case may be; and certificates to the foregoing effect dated each of the Pre-Closing Date and the Closing Date and signed by the President or any Vice President of ITP shall have been delivered to the COMPANY and the STOCKHOLDERS. 8.3 No Litigation. No action or proceeding before a court or any other Governmental Authority or body shall have been instituted or threatened to restrain or prohibit the Merger or the transactions contemplated by this Agreement. 8.4 Opinion of Counsel. The STOCKHOLDERS shall have received an opinion from counsel for ITP and NEWCO, dated the Pre-Closing Date and including a statement to the effect that it may be relied upon as of the Closing Date, substantially in the form annexed hereto as Annex VI 8.5 Consents and Approvals. All necessary consents of and filings required to be obtained or made by ITP or NEWCO with any Governmental Authority or agency relating to the consummation of the transactions contemplated by this Agreement shall have been obtained and made. 8.6 Good Standing Certificates. ITP and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no earlier than 10 days prior to the Pre-Closing Date, duly issued by the Delaware Secretary of State and in each state in which ITP or NEWCO is authorized to do business, showing that each of ITP and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for ITP and NEWCO, respectively, for all periods prior to the Closing have been filed and paid. 8.7 Secretary's Certificate. The COMPANY shall have received a certificate or certificates, dated the Pre-Closing Date and the Closing Date and signed by the secretary of ITP and of NEWCO, certifying the truth and correctness of attached copies of the ITP's and NEWCO's respective Certificates of Incorporation (including amendments thereto), By-Laws (including amendments thereto), and resolutions of the boards of directors and, if required, the STOCKHOLDERS of ITP and NEWCO approving ITP's and NEWCO's entering into this Agreement and the consummation of the transactions contemplated hereby. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO The obligations of ITP and NEWCO with respect to actions to be taken on the Pre-Closing Date and, to the extent specified in this Section 9, on the Closing Date, are subject to the satisfaction or waiver on or prior to the Pre-Closing Date and/or the Closing Date, as the case may be, of all of the conditions set forth in this Section 9. 9.1 Representations and Warranties. All the representations and warranties of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Pre-Closing Date and the Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the STOCKHOLDERS shall have delivered to ITP certificates dated the Pre-Closing Date and the Closing Date and signed by them to such effect. 9.2 Performance of Obligations. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the STOCKHOLDERS and the COMPANY on or before each of the Pre-Closing Date and the Closing Date shall have been duly performed or complied within all material respects on or before each of the Pre-Closing Date and the Closing Date, as the case may be; and the STOCKHOLDERS shall have delivered to ITP certificates dated the Pre-Closing Date and the Closing Date, respectively, and signed by them to such effect. 9.3 No Litigation. No action or proceeding before a court or any other Governmental Authority or body shall have been instituted or threatened to restrain or prohibit the Merger or the transactions contemplated by this Agreement and no Governmental Authority or body shall have taken any other action or made any request of ITP as a result of which the management of ITP deems it inadvisable to proceed with the transactions hereunder. 9.4 Secretary's Certificate. ITP shall have received a certificate or certificates, dated each of the Pre-Closing Date and the Closing Date and signed by the secretary of the COMPANY, certifying the truth and correctness of attached copies of the COMPANY's Certificate or Articles of Incorporation (including amendments thereto), By-Laws (including amendments thereto), and resolutions of the board of directors and the shareholders approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. 9.5 No Material Adverse Change. As of the Pre-Closing Date and as of the Closing Date, no event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to ITP an instrument dated the Closing Date releasing the COMPANY from any and all (i) claims of the STOCKHOLDERS against the COMPANY and ITP and (ii) obligations of the COMPANY and ITP to the STOCKHOLDERS, except for (x) continuing obligations to the STOCKHOLDERS relating to their employment by the COMPANY and (y) obligations arising under this Agreement or the transactions contemplated hereby 9.7 Termination of Related Party Agreements. All agreements specified in Section 7.5 hereof shall have been terminated effective prior to or as of the Closing Date. 9.8 Opinion of Counsel. ITP shall have received an opinion from counsel to the COMPANY and the STOCKHOLDERS, dated the Pre-Closing Date and including a statement to the effect that it may be relied upon as of the Closing Date, substantially in the form attached hereto as Annex VII. 9.9 Consents and Approvals. All necessary consents of and filings with any Governmental Authority or agency relating to the consummation of the transactions contemplated herein shall have been obtained and made and all consents and approvals of third parties listed on Schedule 5.19 shall have been obtained. 9.10 Good Standing Certificates. The COMPANY shall have delivered to ITP a certificate, dated as of a date no earlier than 10 days prior to the Pre-Closing Date, duly issued by the appropriate Governmental Authority in the COMPANY's state of incorporation and, unless waived by ITP, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for the COMPANY for all periods prior to the Closing have been filed and paid. 9.11 Employment Agreements. Each of the STOCKHOLDERS shall have entered into an employment agreement substantially in the form attached as Annex VIII hereto. 9.12 Stockholders' Agreement. Each STOCKHOLDER shall have executed a Joinder Agreement substantially in the form of Annex IX hereto binding them and all of their shares of ITP Stock received in the Merger to the provisions of the Stockholders' Agreement of IT Partners, Inc. dated May 29, 1997 (the "Stockholders' Agreement"). 9.13 Subordination Agreement. Each STOCKHOLDER shall have executed a Subordination Agreement substantially in the form of Annex X hereto. 9.14 Financing. ITP and/or NEWCO, as the case may be, shall have secured adequate financing to fund the amount of cash set forth on Annex III under the Intercompany Loan and Security Agreement by and among ITP, NEWCO, the lenders from time to time, Creditanstalt-Bankverein and Creditanstalt Corporate Finance, Inc. (the "Agent"). 10. COVENANTS AFTER CLOSING 10.1 Preparation and Filing of Tax Returns. (a) The COMPANY shall, if possible, file or cause to be filed all separate Returns of any Acquired Party for all taxable periods that end on or before the Closing Date. Each STOCKHOLDER shall pay or cause to be paid all Tax liabilities (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements) shown by such Returns to be due. (b) ITP shall file or cause to be filed all separate Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date. (c) Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Return, amended Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the receding sentence, each party required to file Returns pursuant to this Agreement shall bear all costs of filing such Returns. (d) Each of the COMPANY, NEWCO, ITP and each STOCKHOLDER hereby agrees to report the transaction as a tax-free reorganization pursuant to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code. (e) ITP shall be solely responsible for any taxes payable in respect of the net receivables of the COMPANY existing on the Closing Date. 10.2 Subsequent Acquisitions. ITP covenants and agrees that it will not acquire any other companies or all or substantially all of the assets of any other company through November 30, 1997 if such acquisition would include the issuance of shares of ITP Common Stock at an assumed price per share of less than $5.30. 10.3 Stock Options. Subject to the provisions of the Stockholders' Agreement referred to in Section 9.12 hereof, ITP covenants and agrees that it will reserve an aggregate of 60,000 shares of its Common Stock for issuance upon exercise of options granted from time to time to employees of the Surviving Corporation in the sole and absolute discretion of ITP's Board of Directors. ITP's Board of Directors will consider the recommendations of the President of the Surviving Corporation with regard to the employees who should receive such options. 11. INDEMNIFICATION The STOCKHOLDERS, ITP and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 General Indemnification by the STOCKHOLDERS. The STOCKHOLDERS covenant and agree that they, jointly and severally, will indemnify, defend, protect and hold harmless ITP, NEWCO, the COMPANY and the Surviving Corporation at all times, from and after the date of this Agreement until the Expiration Date, from and against all claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and reasonable expenses of investigation) incurred by ITP, NEWCO, the COMPANY or the Surviving Corporation as a result of or arising from (i) any breach of the representations and warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability under any Federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to the COMPANY or the STOCKHOLDERS, or arising out of or based upon any omission or alleged omission by the COMPANY and/or the STOCKHOLDERS to state a material fact relating to the COMPANY or the STOCKHOLDERS required to be stated or necessary to make the statements not misleading, or (iv) any Tax imposed upon the COMPANY, NEWCO or the Surviving Corporation or relating to any third party or Acquired Party for any period ending on or prior to the Closing Date, including, in each case, any such Tax arising out of or in connection with the transactions effected pursuant to this Agreement or any such Tax for which an Acquired Party may be liable under Section 1.1502-6 of the Treasury Regulations (or any similar provisions of state, local or foreign law), as a transferee or successor, by contract or otherwise. 11.2 Indemnification by ITP. ITP covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the ITP Expiration Date, from and against all claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by ITP or NEWCO of its representations and warranties set forth herein or on the schedules or certificates delivered in connection herewith, (ii) any breach of any agreement on the part of ITP or NEWCO under this Agreement, (iii) any liability under any Federal or state law or regulation, at common law or otherwise, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to ITP or NEWCO, or arising out of or based upon any omission or alleged omission to state a material fact relating to ITP or NEWCO required to be stated or necessary to make the statements not misleading, or (iv) any liability associated with Charles Schaeffer's guaranty of the COMPANY's lease dated April 17, 1997. 11.3 Third Person Claims. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), of the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party, such consent not to be unreasonably withheld or delayed. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate, at the Indemnifying Party's expense, with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement to said Third Person plus all indemnifiable costs and expenses incurred to date, the Indemnifying Party shall be relieved of its duty to defend and shall tender the Third Person claim back to the Indemnified Party, who shall thereafter, at its own expense, be responsible for the defense and negotiation of such Third Person claim. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnified Party may settle such matter, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. 11.4 Exclusive Remedy. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party, provided that nothing herein shall be construed to limit the right of a party, in a proper case, to seek injunctive relief for a breach of this Agreement or to seek relief for a breach of any employment agreement with, or any stock option issued by, ITP. 11.5 Limitations on Indemnification. (a) the persons or entities indemnified pursuant to Section 11.1 or 11.2(i), (ii) (except as it relates to claims for Initial or Subsequent Merger Consideration) or (iii) shall not assert any claim other than a Third Person claim for indemnification hereunder until such time as, and solely to the extent that, the aggregate of all claims which such persons may have shall exceed $150,000. An amount equal to $150,000 shall be a cumulative deductible against any claim for indemnification hereunder. No person shall be entitled to indemnification under this Section 11: (i) if and to the extent that such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement; and (ii) unless such claim has been presented to the indemnifying party with reasonable specificity describing the source, nature and, if possible to ascertain, the potential amount of such claim and unless such claim has been presented prior to the applicable Expiration Date or ITP Expiration Date, as the case may be. (b) ITP shall have the right, upon written notice, to offset indemnification amounts due to it pursuant to this Agreement against payments due to the STOCKHOLDERS under (i) this Agreement (including, without limitation, the consideration set forth on Annex III hereto) and/or (ii) any contract contemplated by, or referred to in, this Agreement. (c) Except for claims for Initial or Subsequent Merger Consideration, the indemnification obligations under Section 11.1 shall be limited, in the aggregate, to $3 million. To the extent amounts are outstanding under the Notes, claims under Section 11.1 in excess of $1 million shall offset amounts due to the STOCKHOLDERS under the Notes. The indemnification obligations under Section 11.2 shall be limited, in the aggregate, to $3 million. 12. TERMINATION OF AGREEMENT 12.1 Termination. This Agreement may be terminated at any time prior to the Closing Date solely: (a) by mutual consent of the boards of directors of ITP and the COMPANY; (b) by the STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by ITP (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by October 31, 1997, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (c) by the STOCKHOLDERS or the COMPANY, on the one hand, or by ITP, on the other hand, if a material breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein, and the curing of such default shall not have been made on or before the Closing Date; or (d) pursuant to Section 7.7 hereof. 12.2 Liabilities in Event of Termination. Except as provided in Section 7.7 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses. 13. NONCOMPETITION 13.1 Prohibited Activities. Provided that there is no Event of Default (as defined in the Note) by ITP which remains uncured for a period of thirty (30) days under the Note issued to such STOCKHOLDER pursuant to Article III hereof, the STOCKHOLDERS will not, for a period of three (3) years following the Closing Date, for any reason whatsoever, directly or indirectly, for themselves or on behalf of or in conjunction with any other person, company, partnership, corporation or business of whatever nature: (a) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a managerial capacity, whether as an employee, independent contractor, consultant or advisor, or as a sales representative, in any business selling any products or services in direct competition with ITP or any of the subsidiaries thereof, within 300 miles of where the COMPANY or any of its subsidiaries conducted business prior to the effectiveness of the Merger (the "Territory"); (b) call upon any person who is, at that time, within the Territory, an employee of ITP (including the subsidiaries thereof) in a sales representative or managerial capacity for the purpose or with the intent of enticing such employee away from or out of the employ of ITP (including the subsidiaries thereof), provided that each STOCKHOLDER shall be permitted to call upon and hire any member of his or her immediate family; (c) call upon any person or entity which is, at that time, or which has been, within three (3) years prior to the Closing Date, a customer of ITP (including the subsidiaries thereof), of the COMPANY within the Territory for the purpose of soliciting or selling products or services in direct competition with ITP within the Territory; (d) call upon any prospective acquisition candidate, on any STOCKHOLDER's own behalf or on behalf of any competitor in similar or incidental businesses or activities, which candidate, to the actual knowledge of such STOCKHOLDER after due inquiry, was called upon by ITP (including the subsidiaries thereof) or for which, to the actual knowledge of such STOCKHOLDER after due inquiry, ITP (or any subsidiary thereof) made an acquisition analysis, for the purpose of acquiring such entity; or (e) disclose customers, whether in existence or proposed, of the COMPANY to any person, firm, partnership, corporation or business for any reason or purpose whatsoever except to the extent that the COMPANY has in the past disclosed such information to the public for valid business reasons or disclosure is specifically required bylaw. 13.2 Damages. Because of the difficulty of measuring economic losses to ITP as a result of a breach of the foregoing covenant, and because of the immediate and irreparable damage that could be caused to ITP for which it would have no other adequate remedy, each STOCKHOLDER agrees that, in the event of breach by such STOCKHOLDER, the foregoing covenant may be enforced by ITP by injunctions and restraining orders. 13.3 Reasonable Restraint. It is agreed by the parties hereto that the foregoing covenants in this Section 13 impose a reasonable restraint on the STOCKHOLDERS in light of the activities and business of ITP (including the subsidiaries thereof) on the date of the execution of this Agreement and the current plans of ITP. 13.4 Severability, Reformation. The covenants in this Section 13 are severable and separate, and the unenforceability of any specific covenant shall not affect the provisions of any other covenant. Moreover, in the event any court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the parties that such restrictions be enforced to the fullest extent which the court deems reasonable, and this Agreement shall thereby be reformed. 13.5 Independent Covenant. All of the covenants in this Section 13 shall be construed as an agreement independent of any other provision in this Agreement, and the existence of any claim or cause of action of any STOCKHOLDER against ITP (including the subsidiaries thereof), whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by ITP of such covenants. 13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that this covenants in this Section 13 is a material and substantial part of this transaction and the consideration for this transaction. 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they, had in the past, currently have, and in the future may have, access to certain confidential information of the COMPANY and/or ITP, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's and/or ITP's respective businesses. The STOCKHOLDERS agree that they will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except (a) to authorized representatives of ITP who need to know information in connection with the transactions contemplated hereby, who have been informed of the confidential nature of such information and who have agreed to keep such information confidential as provided hereby, (b) following the Closing, such information may be disclosed by the STOCKHOLDERS as is required in the course of performing their duties for ITP or the Surviving Corporation and (c) to counsel and other advisers, provided that such advisers (other than counsel) agree to the confidentiality provisions of this Section 14.1, unless (i) such information becomes known to the public generally through no fault of any such STOCKHOLDERS, (ii) disclosure is required by law or the order of any Governmental Authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), the STOCKHOLDERS shall, if possible, give prior written notice thereof to ITP and provide ITP with the opportunity to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the STOCKHOLDERS of the provisions of this Section 14, ITP shall be entitled to an injunction restraining such STOCKHOLDERS from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting ITP from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, the STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate confidential information with respect to the COMPANY. 14.2 ITP and NEWCO. ITP and NEWCO recognize and acknowledge that they had in the past, currently have, and in the future may have, access to certain confidential information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. ITP and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not disclose such confidential information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except (a) to the STOCKHOLDERS and to authorized representatives of the COMPANY, and (b) to counsel, the Agent and the Lenders and other advisers, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 14.2, unless (i) such information becomes known to the public generally through no fault of ITP or NEWCO, (ii) disclosure is required by law or the order of any Governmental Authority under color of law, provided, that prior to disclosing any information pursuant to this clause (ii), ITP and NEWCO shall, if possible, give prior written notice thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the STOCKHOLDERS with the opportunity to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by ITP or NEWCO of the provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled to an injunction restraining ITP and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the STOCKHOLDERS from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. 14.3 Damages. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Sections 14.1 and 14.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 14.4 Survival. The obligations of the parties under this Article 14 shall survive the termination of this Agreement for a period of three (3) years from the Closing Date. 15. STOCKHOLDERS' AGREEMENT 15.1 Stockholders' Agreement. Each of the STOCKHOLDERS shall have executed a Joinder Agreement substantially in the form of Annex IX hereto binding them and all of their shares of ITP Stock received in the Merger to the provisions of the Stockholders' Agreement. The certificates evidencing the ITP Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement will bear a legend substantially in the form set forth below and containing such other information as ITP may deem necessary or appropriate: EXCEPT AS PROVIDED BY THAT CERTAIN STOCKHOLDERS' AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY FOR INSPECTION, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION. 16. FEDERAL SECURITIES ACT REPRESENTATIONS The STOCKHOLDERS acknowledge that the shares of ITP Stock to be delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will not be registered under the Act and therefore may not be resold without compliance with the 1933 Act. The ITP Stock to be acquired by the STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 16.1 Compliance with Law. The STOCKHOLDERS covenant, warrant and represent that none of the shares of ITP Stock issued to the STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after full compliance with all of the applicable provisions of the 1933 Act and the rules and regulations of the SEC. All the ITP Stock shall bear the following legend in addition to the legend required under Section 15 of this Agreement: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF REQUIRED BY I.T. PARTNERS, INC., OPINION OF COUNSEL TO I. T. PARTNERS, INC. STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT. 16.2 Economic Risk: Sophistication. The STOCKHOLDERS represent and warrant that they are able to bear the economic risk of an investment in the ITP Stock acquired pursuant to this Agreement, can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment in the ITP Stock. The STOCKHOLDERS represent and warrant that they have had an adequate opportunity to ask questions and receive answers from the officers of ITP concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of ITP, business, operations, financial conditions and plans for ITP, and any plans for additional acquisitions and the like. Each STOCKHOLDER represents that after taking into consideration the information and advice provided herein each STOCKHOLDER has the requisite knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of this investment. 17. GENERAL 17.1 Cooperation. The COMPANY, the STOCKHOLDERS, ITP and NEWCO, shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The STOCKHOLDERS will cooperate and use their reasonable efforts to have the present officers, directors and employees of the COMPANY cooperate with ITP on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any Tax Return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 17.2 Successors and Assigns. Except that ITP and the Surviving Corporation may assign the benefits of this Agreement to the Agent, this Agreement and the rights of the parties hereunder (including, but not limited to, the right to receive the Subsequent Merger Consideration) may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the successors of ITP, and the heirs and legal representatives of the STOCKHOLDERS. 17.3 Entire Agreement. This Agreement (including the Schedules, exhibits and annexes attached hereto) and the documents delivered pursuant hereto constitute the entire agreement and understanding among the STOCKHOLDERS, the COMPANY, NEWCO and ITP and supersede any prior agreement and understanding relating to the subject matter of this Agreement. This Agreement, upon execution, constitutes a valid and binding agreement of the parties hereto enforceable in accordance with its terms and may be modified or amended only by a written instrument executed by the STOCKHOLDERS, the COMPANY, NEWCO and ITP, acting through their respective officers or trustees, duly authorized by their respective boards of directors. Any disclosure made any Schedule delivered pursuant hereto shall be deemed to have been disclosed for purposes of any other Schedule required hereby, provided that the COMPANY and the STOCKHOLDERS shall make a good faith effort to cross reference disclosure. as necessary or advisable, between related Schedules. 17.4 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 17.5 Brokers and Agents. Each party represents and warrants that it employed no broker or agent in connection with this transaction and agrees to indemnify the other parties hereto against all loss, cost, damages or expense arising out of claims for fees or commissions of brokers employed or alleged to have been employed by such indemnifying party. Notwithstanding the foregoing, it is acknowledged and understood that the STOCKHOLDERS retained the services of The Geneva Companies and will be solely responsible for any fees, commissions or expenses of that entity. 17.6 Expenses. (a) Whether or not the transactions herein contemplated shall be consummated, each of the parties hereto will pay its own fees, expenses and disbursements and those of its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by it under this Agreement. (b) Each STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the transactions contemplated hereby. Each STOCKHOLDER shall file all necessary documentation and Returns with respect to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he, and not the COMPANY or ITP, will pay all Taxes due upon receipt of the consideration payable pursuant to Section 2 hereof, and will assume all Tax risks and liabilities of such STOCKHOLDER in connection with the transactions contemplated hereby. 17.7 Notices. All notices or communications required or permitted hereunder shall be in writing and may be given by depositing the same in United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or by delivering the same in person to an officer or agent of such party. (a) If to ITP, or NEWCO, addressed to them at: IT Partners, Inc. 9881 Broken Land Parkway, Suite 102 Columbia, Maryland 21046 Attn: Mr. Daniel J. Klein with copies to: Piper & Marbury L.L.P. Charles Center South 36 South Charles Street Baltimore, Maryland 21201 Attn: Earl S. Wellschlager, Esquire (b) If to the STOCKHOLDERS, addressed to them at their addresses set forth on Annex IV, with copies to such counsel, if any, as is set forth with respect to each STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: Financial Systems Consulting, Inc. One World Trade Center Suite 1980 Long Beach, California 90831 Attn: Mr. Charles Schaeffer, President with copies to: Higham, McConnell & Dunning 28202 Cabot Road, Suite 450 Laguna Niguel, California 92677- 1250 Attn: Douglas F. Higham, Esquire or to such other address or counsel as any party hereto shall specify pursuant to this Section 17.7 from time to time. 17.8 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Maryland, except that matters herein within the purview of the matters covered by the General Corporation Law of the State of Delaware shall be governed by such General Corporation Law, in each case without reference to conflicts of laws principles. 17.9 Exercise of Rights and Remedies. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 17.10 Time. Time is of the essence with respect to this Agreement. 17.11 Reformation and Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 17.12 Remedies Cumulative. No right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 17.13 Captions. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 17.14 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of ITP, NEWCO, the COMPANY and STOCKHOLDERS who will hold or who hold at least 50% of the ITP Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 17.14 shall be binding upon each of the parties hereto, any other person receiving ITP Stock in connection with the Merger and each future holder of such ITP Stock. 17.15 Attorneys' Fees. In the event of any arbitration or proceeding arising out of or related to this Agreement, the prevailing party shall be entitled to recover from the losing party all of its costs and expenses incurred in connection with such arbitration or proceeding, including court costs and reasonable attorneys' fees, whether or not such arbitration or proceeding is prosecuted to judgment. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. IT PARTNERS, INC. By: (SEAL) Name: Daniel J. Klein Title: President By: (SEAL) Name: Jamie E. Blech Title: Secretary ITP NO. 4, INC. By: (SEAL) Name: Daniel J. Klein Title: Chairman of the Board By: (SEAL) Name: Jamie E. Blech Title: Assistant Secretary FINANCIAL SYSTEMS CONSULTING INC. By: (SEAL) Name: Title: By: (SEAL) Name: Title: STOCKHOLDERS: (SEAL) Charles Schaeffer (SEAL) Garrett Schaeffer EX-10.6 15 INCLINE BUSINESS COMBINATION AGREEMENT AGREEMENT AND PLAN OF ORGANIZATION dated as of February , 1998 by and among IT PARTNERS, INC., ITP NO. 11, INC., (a wholly-owned subsidiary of IT Partners, Inc.) INCLINE CORP., and the STOCKHOLDERS named herein TABLE OF CONTENTS 1. THE MERGER. . . . . . . . . . . . . . . . . . . . . . 1.1 Delivery and Filing of Articles of Merger. . . . . . . 1.2 Effective Time of the Merger . . . . . . . . . . . . . 1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, ITP and NEWCO. . . . . . . . . . . . . 2. CONVERSION OF STOCK . . . . . . . . . . . . . . . . . . 2.1 Manner of Conversion . . . . . . . . . . . . . . . . . 3. DELIVERY OF MERGER CONSIDERATION; POST CLOSING ADJUSTMENT 3.1 Delivery of Initial Merger Consideration . . . . . . . 3.2 INTENTIONALLY OMITTED 3.3 Additional Merger Consideration. . . . . . . . . . . . 4. CLOSING . . . . . . . . . . . . . . . . . . . . . . . 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 5.1 Due Organization . . . . . . . . . . . . . . . . . . . 5.2 Authorization. . . . . . . . . . . . . . . . . . . . . 5.3 Capital Stock of the COMPANY . . . . . . . . . . . . . 5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 5.5 Financial Statements . . . . . . . . . . . . . . . . . 5.6 Liabilities and Obligations. . . . . . . . . . . . . . 5.7 Accounts and Notes Receivable. . . . . . . . . . . . . 5.8 Intellectual Property; Permits and Intangibles . . . . 5.9 Environmental Matters. . . . . . . . . . . . . . . . . 5.10 Personal Property. . . . . . . . . . . . . . . . . . . 5.11 Significant Customers; Material Contracts and Commitments 5.12 Real Property. . . . . . . . . . . . . . . . . . . . . 5.13 Insurance. . . . . . . . . . . . . . . . . . . . . . . 5.14 Compensation; Employment Agreements; Organized Labor Matters. . . . . . . . . . . . . . . . 5.15 Employee Plans . . . . . . . . . . . . . . . . . . . . 5.16 Conformity with Law; Litigation. . . . . . . . . . . . 5.17 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 5.18 No Violations. . . . . . . . . . . . . . . . . . . . . 5.19 Business Conduct . . . . . . . . . . . . . . . . . . . 5.20 Prohibited Activities. . . . . . . . . . . . . . . . . 5.21 Misrepresentation. . . . . . . . . . . . . . . . . . 5.22 Authority; Ownership . . . . . . . . . . . . . . . . . 5.23 No Intention to Dispose of ITP Stock . . . . . . . . . 6. REPRESENTATIONS AND WARRANTIES OF ITP AND NEWCO . . . 6.1 Due Organization . . . . . . . . . . . . . . . . . . . 6.2 Authorization. . . . . . . . . . . . . . . . . . . . . 6.3 Transaction Not a Breach . . . . . . . . . . . . . . . 6.4 Misrepresentation. . . . . . . . . . . . . . . . . . . 6.5 Capital Stock. . . . . . . . . . . . . . . . . . . . . 6.6 Subsidiaries . . . . . . . . . . . . . . . . . . . . . 6.7 Conformity with Law; Litigation. . . . . . . . . . . . 6.8 Financial Statements . . . . . . . . . . . . . . . . . 6.9 Valuation of ITP Stock . . . . . . . . . . . . . . . . 6.10 Stockholder Agreement. . . . . . . . . . . . . . . . . 7. COVENANTS PRIOR TO CLOSING. . . . . . . . . . . . . . 7.1 Access and Cooperation: Due Diligence. . . . . . . . . 7.2 Conduct of Business Pending Closing. . . . . . . . . . 7.3 Prohibited Activities. . . . . . . . . . . . . . . . . 7.4 [INTENTIONALLY OMITTED]. . . . . . . . . . . . . . . . 7.5 Agreements . . . . . . . . . . . . . . . . . . . . . . 7.6 Notification of Certain Matters. . . . . . . . . . . . 7.7 Amendment of Schedules . . . . . . . . . . . . . . . . 7.8 Further Assurances . . . . . . . . . . . . . . . . . . 7.9 Approval of Merger Agreement . . . . . . . . . . . . . 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE STOCKHOLDERS AND THE COMPANY. . . . . . . . . . . . . . . . . . . . 8.1 Representations and Warranties . . . . . . . . . . . . 8.2 Performance of Obligations . . . . . . . . . . . . . . 8.3 No Litigation. . . . . . . . . . . . . . . . . . . . . 8.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . 8.5 Consents and Approvals . . . . . . . . . . . . . . . . 8.6 Good Standing Certificates . . . . . . . . . . . . . . 8.7 Secretary's Certificate. . . . . . . . . . . . . . . . 8.8 Lease Rental Prepayment. . . . . . . . . . . . . . . . 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO. . 9.1 Representations and Warranties . . . . . . . . . . . . 9.2 Performance of Obligations . . . . . . . . . . . . . . 9.3 No Litigation. . . . . . . . . . . . . . . . . . . . . 9.4 Secretary's Certificate. . . . . . . . . . . . . . . . 9.5 No Material Adverse Change . . . . . . . . . . . . . . 9.6 STOCKHOLDERS' Release. . . . . . . . . . . . . . . . . 9.7 Termination of Related Party Agreements. . . . . . . . 9.8 Opinion of Counsel . . . . . . . . . . . . . . . . . . 9.9 Consents and Approvals . . . . . . . . . . . . . . . . 9.10 Good Standing Certificates . . . . . . . . . . . . . . 9.11 Employment Agreements. . . . . . . . . . . . . . . . . 9.12 Stockholders' Agreement. . . . . . . . . . . . . . . . 9.13 Financing. . . . . . . . . . . . . . . . . . . . . . . 9.14 Working Capital Cash Needs . . . . . . . . . . . . . . 9.15 STOCKHOLDER Distribution . . . . . . . . . . . . . . . 9.16 Landlord Consent. . . . . . . . . . . . . . . . . . . 10. COVENANTS AFTER CLOSING . . . . . . . . . . . . . . . 10.1 Preparation and Filing of Tax Returns. . . . . . . . . 10.2 Stock Options . . . . . . . . . . . . . . . . . . . . 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 11.1 General Indemnification by the STOCKHOLDERS. . . . . . 11.2 Indemnification by ITP . . . . . . . . . . . . . . . . 11.3 Third Person Claims. . . . . . . . . . . . . . . . . . 11.4 Exclusive Remedy . . . . . . . . . . . . . . . . . . . 11.5 Limitations on Indemnification . . . . . . . . . . . . 12. TERMINATION OF AGREEMENT. . . . . . . . . . . . . . . 12.1 Termination. . . . . . . . . . . . . . . . . . . . . . 12.2 Liabilities in Event of Termination. . . . . . . . . . 13. NONCOMPETITION. . . . . . . . . . . . . . . . . . . . 13.1 Prohibited Activities. . . . . . . . . . . . . . . . . 13.2 Damages. . . . . . . . . . . . . . . . . . . . . . . . 13.3 Reasonable Restraint . . . . . . . . . . . . . . . . . 13.4 Severability, Reformation. . . . . . . . . . . . . . . 13.5 Independent Covenant . . . . . . . . . . . . . . . . . 13.6 Materiality. . . . . . . . . . . . . . . . . . . . . . 14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION . . . . . . 14.1 STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . 14.2 INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . . 14.3 Damages. . . . . . . . . . . . . . . . . . . . . . . . 14.4 Survival . . . . . . . . . . . . . . . . . . . . . . . 15. STOCKHOLDER AGREEMENT . . . . . . . . . . . . . . . . 16. FEDERAL SECURITIES ACT REPRESENTATIONS. . . . . . . . 16.1 Compliance with Law. . . . . . . . . . . . . . . . . . 16.2 Economic Risk: Sophistication. . . . . . . . . . . . . 17. GENERAL . . . . . . . . . . . . . . . . . . . . . . . 17.1 Cooperation. . . . . . . . . . . . . . . . . . . . . . 17.2 Successors and Assigns . . . . . . . . . . . . . . . . 17.3 Entire Agreement . . . . . . . . . . . . . . . . . . . 17.4 Counterparts . . . . . . . . . . . . . . . . . . . . . 17.5 Brokers and Agents . . . . . . . . . . . . . . . . . . 17.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . 17.7 Notices. . . . . . . . . . . . . . . . . . . . . . . . 17.8 Governing Law. . . . . . . . . . . . . . . . . . . . . 17.9 Exercise of Rights and Remedies. . . . . . . . . . . . 17.10Time. . . . . . . . . . . . . . . . . . . . . . . . . . 17.11Reformation and Severability. . . . . . . . . . . . . 17.12Remedies Cumulative . . . . . . . . . . . . . . . . . 17.13Captions. . . . . . . . . . . . . . . . . . . . . . . 17.14Amendments and Waivers. . . . . . . . . . . . . . . . . ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF ITP AND NEWCO ANNEX III MERGER CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCK OWNERSHIP OF ITP ANNEX VI FORM OF OPINION OF COUNSEL TO ITP ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT ANNEX IX FORM OF JOINDER AGREEMENT AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (this "Agreement") is made as of February , 1998, by and among (i) IT PARTNERS, INC., a Delaware corporation ("ITP"), (ii) ITP NO. 11, INC., a Delaware corporation ("NEWCO"), (iii) INCLINE CORP., a California corporation (the "COMPANY"), and (iv) Robert Wentworth, Jon DeFina, Philip Tomasi and Charles Menzel (collectively, the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on December 12, 1997, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of ITP; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as "Constituent Corporations") and ITP deem it advisable and in the best interests of the Constituent Corporations and ITP and their respective stockholders that the COMPANY merge with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and California (the "Merger"), and in furtherance thereof have approved the Merger; WHEREAS, unless the context otherwise requires, capitalized terms used in this Agreement or in any schedule attached hereto and not otherwise defined herein shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY. "Additional Merger Consideration" has the meaning set forth in Section 3.2(a). "Affiliates" means any other person or entity that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with a person. "Agent" has the meaning set forth in Section 9.13. "Balance Sheet Date" means October 31, 1997. "Benefit Plan" means any Plan existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the COMPANY, or any predecessor of the COMPANY, under which any employee or former employee of the COMPANY, or any beneficiary thereof, is covered, is eligible for coverage or has benefit rights. "Certificate of Merger" means the Certificate of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such changes therein as may be required by applicable state laws. "Charter Documents" has the meaning set forth in Section 5.1. "Closing Date" has the meaning set forth in Section 4. "Code" means the Internal Revenue Code of 1986, as amended. "Combined Financial Statements" means copies of the unaudited Balance Sheet, Income Statement, Statement of Stockholders' Equity and Statement of Cash Flows of the Surviving Corporation at and for the 12-month period ending December 31, 1998, as if the Merger had occurred effective as of January 1, 1998, with the income and expenses of the Company for the period from January 1, 1998, to the day before the Closing Date being treated as the only income and expenses of the Surviving Corporation during the period from January 1, 1998, to the day before the Closing Date. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "EBITDA" means earnings before interest, taxes, depreciation and amortization prepared in accordance with GAAP. In the case of the COMPANY (for the period from January 1, 1998 through the day before the Closing Date) and the Surviving Corporation, EBITDA shall not be impacted or reduced by any expenses or overhead of ITP, allocated to the COMPANY or the Surviving Corporation, as the case may be, unless such expenses or overhead are pre-approved by the Management of the Surviving Corporation and are directly and solely for the benefit of the Surviving Corporation. "Effective Time of the Merger" means the time as of which the Merger becomes effective, which the parties hereto contemplate will occur on the Closing Date. "Environmental Requirements" has the meaning set forth in Section 5.9(a). "Expiration Date" has the meaning set forth in Section 5(A). "GAAP" means generally accepted accounting principles of the United States applied in a manner consistent with the past practices of the COMPANY. "Governmental Authority" means any governmental, regulatory or administrative body, agency, subdivision or authority, any court or judicial authority, or any public, private or industry regulatory authority, whether national, Federal, state, local or otherwise. "Hazardous Materials" has the meaning set forth in Section 5.9(a). "Intellectual Property" means trademarks, service marks, trade dress, trade names, patents and copyrights and any registration or application for any of the foregoing, and any trade secret, invention, discovery, method of doing business, process, know-how, including but not limited to, training techniques, training materials, computer software (including source and object code), databases, technology systems and integration techniques, product design and product packaging. "Intercompany Loan and Security Agreement" has the meaning set forth in Section 9.13. "ITP" has the meaning set forth in the first paragraph of this Agreement. "ITP Charter Documents" has the meaning set forth in Section 6. 1. "ITP Expiration Date" has the meaning set forth in Section 6. "ITP Stock" means the common stock, par value $.01 per share, of ITP. "Leases" mean the leases for real property included in the Material Contracts. "Lien" has the meaning set forth in Section 5.6. "LTM EBITDA" shall mean the EBITDA of the COMPANY for the twelve (12) month period commencing December 1, 1996 and ending November 30, 1997. The parties agree that, for purposes of the Closing Date, LTM EBITDA is equal to $1.499 Million Dollars. "Knowledge", "best of knowledge", "aware" or similar expressions mean only the actual knowledge of the individual to which the expression is applicable. When such terms are used in connection with the knowledge of a corporate entity, such knowledge shall include only the actual knowledge of the officers or directors of that corporate entity. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Contract" means any lease, instrument, agreement, license or permit set forth on Schedule 5.8, 5.9, 5.10, 5.11, 5.12, 5.14 or 5.15 or any other material agreement to which the COMPANY is a party or by which its properties are bound. "Merger" means the merger of the COMPANY with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and California. "Merger Consideration" has the meaning set forth in Section 3.1(a). "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of NEWCO. "NTM EBITDA" means EBITDA for the Surviving Corporation for the 12-month period ending December 31, 1998, as if the Merger had occurred effective as of January 1, 1998, with the income and expenses of the Company for the period from January 1, 1998, to the day before the Closing Date being treated as the only income and expenses of the Surviving Corporation during the period from January 1, 1998, to the day before the Closing Date. "Person" means any natural person, corporation, partnership, limited liability company, proprietorship, other business organization, trust, union, association or Governmental Authority. "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual. "Relevant Group" has the meaning set forth in Section 5.17(a). "Returns" has the meaning set forth at the end of Section 5.17. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3(e). "Stockholder Agreement" has the meaning set forth in Section 6.10. "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "Surviving Corporation" shall mean NEWCO as the surviving party in the Merger. "Tax" or "Taxes" has the meaning set forth at the end of Section 5.17. "Taxing Authority" has the meaning set forth at the end of Section 5.17. "Transfer Taxes" has the meaning set forth in Section 17.6(b). "Working Capital Cash Needs" means that amount of cash and cash equivalents equal to $100,000. NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGER 1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations will cause the Certificate of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and stamped receipt copies of such filing to be delivered to ITP on or before the Closing Date. The Constituent Corporations will cause a copy of the Certificate of Merger, certified by the Secretary of State of the State of Delaware, to be filed with the Secretary of State of the State of California as soon as practicable thereafter. 1.2 Effective Time of the Merger. At the Effective Time of the Merger and subject to the terms and conditions of this Agreement and the applicable provisions of the Delaware General Corporation Law ("Delaware Law"), the COMPANY shall be merged with and into NEWCO in accordance with the Certificate of Merger, the separate existence of the COMPANY shall cease and NEWCO shall be the Surviving Corporation in the Merger. At the Effective Time of the Merger, the effect of the Merger otherwise shall be as provided in the applicable provisions of Delaware Law and the law of the State of California. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time of the Merger, all the property, rights, privileges, powers and franchises of the COMPANY and NEWCO shall vest in the Surviving Corporation, and all debts, liabilities and duties of the COMPANY and NEWCO shall become the debts, liabilities and duties of the Surviving Corporation. The Merger will be effected in a single transaction. 1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation. At the Effective Time of the Merger: (a) the Certificate of Incorporation of NEWCO then in effect shall be the Certificate of Incorporation of the Surviving Corporation until amended as provided by law; (b) the By-laws of NEWCO then in effect shall be the By-laws of the Surviving Corporation until amended as provided by law; (c) Daniel J. Klein and Jamie E. Blech shall be the directors of the Surviving Corporation until their respective successors are elected or appointed and qualified in accordance with the terms of the By-laws of the Surviving Corporation; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of Delaware Law and of the Certificate of Incorporation and By-laws of the Surviving Corporation; (d) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger. In addition, Daniel J. Klein shall be appointed Chairman of the Board of the Surviving Corporation and Jamie E. Blech shall be appointed vice president and assistant secretary of the Surviving Corporation, each such officer to serve, subject to the provisions of the Certificate of Incorporation and By-laws of the Surviving Corporation, until his successor is duly elected and qualified; and (e) Subject to the provisions of the Stockholder Agreement and subject to Delaware Law, ITP shall use its best efforts to have one of the prior officers of the COMPANY nominated and appointed as a director of ITP to serve until his successor is duly elected and qualified. 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, ITP and NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, ITP and NEWCO as of the Closing Date: (a) the authorized capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (b) the authorized capital stock of ITP will consist of ten million shares of ITP Stock and two million shares of preferred stock, par value $.01 per share ("Preferred Stock"); and (c) the authorized capital stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which 100 shares are issued and outstanding and beneficially owned by ITP. 2. CONVERSION OF STOCK 2.1 Manner of Conversion. The manner of converting the shares of (i) capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, in each case issued and outstanding immediately prior to the Effective Time of the Merger, into shares of (x) ITP Stock and (y) common stock of the Surviving Corporation, respectively, shall be as follows: As of the Effective Time of the Merger: (a) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger will be canceled and extinguished and, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent, with respect to each STOCKHOLDER, (1) the right to receive the number of shares of ITP Stock set forth on Annex III hereto with respect to such STOCKHOLDER; (2) the right to receive the amount of cash set forth on Annex III hereto with respect to such STOCKHOLDER; and (3) subject to the provisions of Section 3.2 hereof, the right to receive the Additional Merger Consideration set forth on Annex III with respect to such STOCKHOLDER; (b) all shares of COMPANY Stock that are held by the COMPANY as treasury stock, if any, shall be canceled and retired and no shares of ITP Stock or other consideration shall be delivered or paid in exchange therefor; and (c) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of ITP, automatically be converted into one fully paid and non-assessable share of common stock of the Surviving Corporation, which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. All ITP Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 15 and 16 hereof, have the same rights as all other shares of outstanding ITP Stock (as set forth in the Certificate of Incorporation of ITP or as otherwise provided by Delaware Law). 3. DELIVERY OF MERGER CONSIDERATION; POST-CLOSING ADJUSTMENTS 3.1 Delivery of Initial Merger Consideration (a) On the Closing Date, the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, upon surrender of such certificates shall receive (i) the respective number of shares of ITP Stock set forth on Annex III and (ii) the amount of cash set forth on Annex III with respect to such STOCKHOLDER (collectively, the "Merger Consideration"). The cash payable pursuant to clause (ii) shall be paid by wire transfer to each of the STOCKHOLDERS as designated by each of the STOCKHOLDERS on the Closing Date. (b) Certificate Delivery. The STOCKHOLDERS shall deliver in trust to Swidler & Berlin, Chartered, counsel to ITP, at the Closing the certificates, representing all outstanding shares of the COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by stock powers duly endorsed in blank, with signatures guaranteed by a national or state chartered bank or other financial institution, and with all necessary Transfer Tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. Upon consummation of the transactions contemplated to occur on the Closing Date, all of such certificates shall be deemed released by such counsel to ITP without any further action on the part of such counsel. 3.2 [INTENTIONALLY OMITTED]. 3.3 Additional Merger Consideration. As promptly as practicable after the close of the Surviving Corporation's fiscal year ending December 31, 1998, and in any event on or before March 31, 1999, Surviving Corporation (on behalf of the STOCKHOLDERS) shall prepare and deliver to ITP the Combined Financial Statements, including a calculation for NTM EBITDA, prepared on a basis consistent with GAAP. ITP shall have 30 days after receipt of the Combined Financial Statements and the STOCKHOLDERS' determination of NTM EBITDA to review such information (the "NTM Review Period"). (a) If ITP accepts the STOCKHOLDERS' determination of NTM EBITDA, or if ITP fails to give notice to the STOCKHOLDERS within the NTM Review Period ("NTM Acceptance"), and if the determination of NTM EBITDA is equal to or greater than 115% of the LTM EBITDA, within 5 days of the NTM Acceptance, ITP shall deliver to the STOCKHOLDERS the respective number of additional shares of ITP Stock set forth on Annex III (the "Additional Merger Consideration"). (b) If the STOCKHOLDERS' determination of NTM EBITDA is less than 115% of the LTM EBITDA, the STOCKHOLDERS shall not be entitled to receive the Additional Merger Consideration. (c) ITP may dispute the STOCKHOLDERS' determination of NTM EBITDA by giving notice within the NTM Review Period of such dispute to the STOCKHOLDERS setting forth in reasonable detail the amounts in dispute and the basis for such dispute. If ITP fails to deliver a notice of objections during the NTM Review Period, ITP shall be deemed to have accepted the STOCKHOLDERS' determination of NTM EBITDA upon expiration of the NTM Review Period. (d) If the amount of NTM EBITDA is in dispute, ITP and its accountants and the STOCKHOLDERS and their accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. (i) If the parties are able to resolve such dispute and agree upon the NTM EBITDA and if such agreed NTM EBITDA is less than 115% of the LTM EBITDA, the STOCKHOLDERS shall not be entitled to receive the Additional Merger Consideration. (ii) If the parties are able to resolve such dispute and agree upon the NTM EBITDA, and if such agreed NTM EBITDA is equal to or greater than 115% of the LTM EBITDA, ITP shall deliver to STOCKHOLDERS the respective number of shares of ITP Stock set forth on Annex III as Additional Merger Consideration within five (5) business days after such resolution and agreement. (iii) If the parties are unable to resolve such dispute and agree on the NTM EBITDA within 15 days of the date of receipt by the STOCKHOLDERS of a written notice of dispute, ITP and the STOCKHOLDERS shall, within five additional days, retain Coopers & Lybrand, L.L.P., (or such other independent "Big Six" accounting firm to be mutually agreed upon by ITP and the STOCKHOLDERS) (the "NTM Arbitrator"), which NTM Arbitrator shall, within 30 days of the retention of the NTM Arbitrator, resolve such dispute, and provide written notice of such resolution, including the NTM Arbitrator's determination of NTM EBITDA, by facsimile, confirmed by mail to ITP and the STOCKHOLDERS, and such resolution shall be binding and conclusive. If NTM EBITDA, as calculated by the NTM Arbitrator, is less than 115% of LTM EBITDA, then the STOCKHOLDERS shall not be entitled to receive Additional Merger Consideration and shall bear all of the fees and disbursements incurred by the NTM Arbitrator for resolving such dispute, conversely, if the NTM EBITDA, as determined by the NTM Arbitrator, is equal to or greater than 115% of the LTM EBITDA, then ITP shall deliver to the STOCKHOLDERS the respective number of shares of ITP Stock set forth on Annex III as Additional Merger Consideration within 5 business days after receipt of notice of such resolution and calculation from the NTM Arbitrator, and ITP shall bear all fees and disbursements incurred by the NTM Arbitrator for resolving such dispute. 4. CLOSING At Closing, the parties shall take all actions necessary to prepare to (i) effect the Merger and (ii) effect the conversion and delivery of shares referred to in Section 2 hereof; provided, that such actions shall not include the actual completion of the Merger for purposes of this Agreement or the conversion and delivery of the shares and transmission of funds by wire referred to in Section 3 hereof, which actions shall only be taken upon the Closing Date as herein provided. If there is no Closing Date and this Agreement terminates, each of ITP and the COMPANY hereby covenants and agrees to do all things required by Delaware Law and all things which counsel for the COMPANY advises ITP are required by applicable laws of the State of California in order to rescind any merger or other actions effected by the advance filing of the Certificate of Merger as described in this Section 4. On the Closing Date (x) the Certificate of Merger shall be or shall have been filed in accordance with Delaware Law so that it shall be or, as of 11:00 a.m. Pacific Time on the Closing Date, shall become effective and the Merger shall thereby be effected, and (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares and the transmission of funds by wire pursuant to Section 3 hereof shall occur. The date on which the actions described in the preceding clauses (x) and (y) occur shall be referred to as the "Closing Date." 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) Representations and Warranties of the COMPANY and the STOCKHOLDERS. Each of the COMPANY and each of the STOCKHOLDERS jointly and severally represents and warrants to ITP and NEWCO that all of the following representations and warranties in this Section 5 are true as of the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the last day of such period being the "Expiration Date"), except that the representations and warranties set forth in Sections 5.9 and 5.17 hereof shall survive until such time as the applicable statute of limitations period has run, which shall be deemed to be the Expiration Date for such purposes. 5.1 Due Organization. The COMPANY is a corporation duly incorporated, validly existing and in good standing under the laws of the State of California, and is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted, to own or hold under lease the properties and assets it now owns or holds under lease, and to perform all of its obligations under the Material Contracts; is duly qualified in the jurisdictions listed in Schedule 5.1 and there are no other jurisdictions in which the conduct of the COMPANY's business or activities or its ownership of assets requires any other qualification under applicable law, the absence of which would have a materially adverse effect on the COMPANY's business, condition (financial or other), properties, business prospects or results of operations (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"). True, complete and correct copies of the Articles of Incorporation and By-laws, each as amended, of the COMPANY (the "Charter Documents") are all attached to Schedule 5.1. The minute books and stock records of the COMPANY, as heretofore made available to ITP, are correct and complete in all material respects. 5.2 Authorization. The representatives of the COMPANY executing this Agreement have the authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement by the COMPANY and performance by the COMPANY of its obligations under this Agreement and the consummation by the COMPANY of the transactions contemplated hereby have been duly authorized by all necessary corporate action in accordance with applicable law and the Articles of Incorporation and By- Laws of the COMPANY on the part of the COMPANY and the STOCKHOLDERS. This Agreement constitutes the valid and binding obligation of the COMPANY, enforceable in accordance with its terms. 5.3 Capital Stock of the COMPANY. The entire authorized capital stock of the COMPANY is as set forth in Schedule 1.4. All of the issued and outstanding shares of capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Except as disclosed on Schedule 5.3, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements to which the COMPANY or the STOCKHOLDERS is a party requiring or restricting issuance, sale or transfer of any equity securities of the COMPANY or any securities convertible directly or indirectly into equity securities of the COMPANY, or evidencing the right to subscribe for any equity securities of the COMPANY, or giving any person any rights with respect to the capital stock of the COMPANY. Except as contemplated by this Agreement or disclosed on Schedule 5.3, there are no voting agreements, voting trusts, other agreements (including cumulative voting rights), commitments or understandings with respect to the capital stock of the COMPANY. All of the issued and outstanding shares of capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, and are owned of record and beneficially by the STOCKHOLDERS. 5.4 Subsidiaries. The COMPANY currently has no, and since its formation has never had any, subsidiaries. The COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any Person, nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.5 Financial Statements. The COMPANY has delivered to ITP copies of the following financial statements (collectively, the "Financial Statements"): (a) Unaudited Balance Sheet, Income Statement, Statement of Stockholders' Equity and Statement of Cash Flows at and for the year ended December 31, 1996; (b) Balance Sheet, Income Statement, Statement of Stockholders' Equity, and Statement of Cash Flows at and for the interim period ended October 31, 1997, audited by Arthur Andersen, L.L.P.; and (c) Unaudited Balance Sheet, Income Statement, Statement of Shareholders' Equity and Statement of Cash Flows at and for the interim period ended November 30, 1997. Each of the Financial Statements is consistent with the books and records of the COMPANY (which, in turn, are accurate and complete in all material respects) and fairly presents the COMPANY's financial condition, assets and liabilities as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, consistently applied among the periods which are the subject of the Financial Statements, except unaudited interim financial statements which were or are subject to normal year-end adjustments which were not and are not expected to be material in amount and the addition of required footnotes thereto. The COMPANY has not deferred recognition of any of its accounts payable or accelerated recognition of any of its accounts receivable. 5.6 Liabilities and Obligations. The COMPANY s assets, tangible or intangible, are owned by the COMPANY free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities and charges of any kind (each, a "Lien"), except for purchase money security interests created in the ordinary course of business. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.6) as of the Balance Sheet Date of (i) all liabilities of the COMPANY in excess of $10,000 which are not reflected on the balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the COMPANY's Financial Statements at the Balance Sheet Date and (ii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements to which the COMPANY is a party. Except as set forth on Schedule 5.6, since the Balance Sheet Date the COMPANY has not incurred any liabilities in excess of $10,000 of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. 5.7 Accounts and Notes Receivable. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.7) of the accounts and notes receivable of the COMPANY as of the Balance Sheet Date. In the period between the Balance Sheet Date and the Closing Date the COMPANY shall collect accounts and notes receivables, and pay accounts and notes payable, in a manner consistent with past practices and within ten (10) days prior to Closing, the COMPANY shall provide ITP (i) an accurate list of all outstanding receivables obtained subsequent to the Balance Sheet Date and as of a date which is within ten (10) calendar days of the Closing Date and (ii) an aging of all such accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.7, the accounts, notes and other receivables shown on Schedule 5.7 and on the A/R Aging Reports are and shall be, and the COMPANY has no reason to believe that any such account receivable is not or shall not be, collectible in the amounts shown net of reserves reflected in the balance sheet as of the Balance Sheet Date. 5.8 Intellectual Property; Permits and Intangibles. (a) The COMPANY owns or has valid licenses to all Intellectual Property required for or otherwise used in connection with the conduct of its business and the COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.8(a)) of all Intellectual Property owned or used by the COMPANY including a list of all licenses and sublicenses granted by or to the COMPANY with respect to any Intellectual Property. To the COMPANY's knowledge, each item of Intellectual Property owned by or licensed to the COMPANY is valid and in full force and effect. Except as set forth on Schedule 5.8(a), all right, title and interest in and to each item of Intellectual Property owned by or licensed to the COMPANY is not subject to any restriction, royalty or fee arrangement or pending or, to the COMPANY's knowledge, threatened claim or dispute. To the COMPANY's knowledge, none of the Intellectual Property owned by or licensed to the COMPANY nor any product sold or licensed or service provided by the COMPANY, infringes any Intellectual Property right of any other person or entity and to the COMPANY's knowledge, no Intellectual Property owned by or licensed to the COMPANY is infringed upon by any other person or entity. (b) The COMPANY holds all licenses, franchises, permits and governmental authorizations the absence of any of which could have a Material Adverse Effect, and the COMPANY has delivered to ITP an accurate list and summary description (which is set forth on Schedule 5.8(b)) of all such licenses, franchises, permits and other governmental authorizations, including permits, licenses, franchises and certificates (a list of all environmental permits and other environmental approvals is set forth on Schedule 5.9). To the COMPANY's knowledge, the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.8(b) and 5.9 are valid and in effect, and the COMPANY has not received any notice that any Governmental Authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. To the COMPANY's knowledge, the COMPANY has conducted and is conducting its business in compliance with the requirements, standards, criteria and conditions set forth in the licenses, franchises, permits and other governmental authorizations listed on Schedules 5.8(b) and 5.9 and is not in material violation of any of the foregoing or of any related regulatory or legal requirements except where such non-compliance or violation would not have a Material Adverse Effect. Except as specifically provided in Schedule 5.8(a) or 5.8(b), the transactions contemplated by this Agreement will not (i) result in the infringement or misappropriation by the COMPANY of any Intellectual Property right of any other person or entity, or (ii) result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any licenses, franchises, permits or government authorizations listed on Schedule 5.8(b) or any contracts involving the grant to the COMPANY of any rights relating to the Intellectual Property of any third party. (c) To the COMPANY's knowledge, the COMPANY s products and services conform in all material respects with any material applicable specification, documentation, performance standard, or contractual commitment by the COMPANY existing with respect thereto, and there are no unresolved material claims under warranty, contract or otherwise with respect to the COMPANY s services or products. 5.9 Environmental Matters. (a) (i) "Environmental Requirements" for purposes of this Agreement shall mean all applicable federal, state and local laws, rules, regulations, ordinances and requirements relating to Hazardous Materials (as defined below), pollution, or protection of the environment, health or safety, all as amended or hereafter amended. (ii) "Hazardous Materials" for purposes of this Agreement shall include, without limitation: (A) hazardous materials, hazardous substances, extremely hazardous substances, hazardous chemicals, toxic chemicals, toxic substances, pollutants, contaminants, solid wastes or hazardous wastes, as those terms are defined or used in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. ("RCRA"), the Clean Water Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act,42 U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq.,the Occupational Safety and Health Act, and any other Environmental Requirements and other terms of similar import or meaning; (B) petroleum and petroleum products, including, without limitation, crude oil or any faction thereof; (C) any radioactive material, including, without limitation, anysource, special nuclear, or by-product material as defined in 42 U.S.C. Section 2011 et seq.; and (D) asbestos in any form or condition. (b) Except as set forth on Schedule 5.9: (i) the COMPANY and each of its predecessors are and at all times have been in compliance in all material respects with, and are not and have not been in violation of or liable under, all Environmental Requirements; (ii) the COMPANY and each of its predecessors possess all permits, licenses and certificates required by all Environmental Requirements, and have filed all notices or applications required thereby; (iii) no environmental clearances, approvals or consents are required under applicable law from any Governmental Authority or entity in order to consummate the transactions contemplated in this Agreement or for the COMPANY to continue operations after the Closing Date; (iv) (A) the COMPANY and each of its predecessors have not been subject to, or received any notice of any private, administrative or judicial claim or action, or notice of any intended private, administrative or judicial claim or action or received any request for information relating to the presence or alleged presence of Hazardous Materials (1) in, under or upon any real property currently or formerly owned, leased, operated or used by (a) the COMPANY or any of its predecessors or (b) any other person that has, at any time, disposed of Hazardous Materials on behalf of the COMPANY or any of its predecessors; or (2) ever possessed, owned or generated by or on behalf of the COMPANY or any of its predecessors at any location; (B) there is no basis for any such notice, claim, action or request; and (C) there are no pending or, to the knowledge of the COMPANY and each of its predecessors, threatened claims, actions or proceedings (or notices of potential claims, actions or proceedings) from any Governmental Authority or any other entity regarding any matter relating to health, safety or protection of the environment against the COMPANY or any of its predecessors. (v) There are and have been no past or present events, conditions, circumstances, activities, practices, incidents or actions which materially interfere with or prevent continued compliance by the COMPANY or the Surviving Corporation with any Environmental Requirements, give rise to any legal obligation or liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation against or involving the COMPANY or any real property presently or previously owned or used by the COMPANY under any Environmental Requirements or related common law theories; (vi) No real property currently or formerly owned or operated by the COMPANY or any of its predecessors is or was listed on the National Priorities List, the Comprehensive Environmental Response and Compensation Liability Index System or any similar state or local list of potential or confirmed hazardous waste sites; (vii) To the COMPANY's knowledge, no conditions exist on adjacent properties that threaten the environmental condition or safety of any property owned, operated or used by the COMPANY; and (viii) The COMPANY and its predecessors have not released or disposed of any Hazardous Materials at any property owned or used by the COMPANY or its predecessors and, to the COMPANY's knowledge, no other person has released or disposed of Hazardous Materials at any such property. 5.10 Personal Property. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.10) of (x) all personal property with a fair market value in excess of $10,000 which is included (or that will be included) in "depreciable plant, property and equipment" (or similarly named line item) on the Balance Sheet as of the Balance Sheet Date, (y) all other personal property owned by the COMPANY with a value individually in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property, including, in the case of each of (x), (y) and (z), true, complete and correct copies of all such leases which have been provided to ITP's counsel. Except as set forth on Schedule 5.10, (i) all personal property with a value individually in excess of $10,000 used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.10, (ii) all of the personal property listed on Schedule 5.10 is in good working order and condition, ordinary wear and tear excepted, and (iii) all leases and agreements included on Schedule 5.10 are in full force and effect and constitute valid and binding agreements of the COMPANY, and to the COMPANY's knowledge, of the other parties thereto in accordance with their respective terms. 5.11 Significant Customers; Material Contracts and Commitments. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.11) of all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.11, means a customer (or person or entity) representing 5% or more of the COMPANY's total annual revenues as of the Balance Sheet Date. Except to the extent set forth on Schedule 5.11, none of the COMPANY's significant customers has canceled or substantially reduced or, to the knowledge of the COMPANY, is currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. Except as listed or described on Schedule 5.11, as of or on the date hereof, neither the COMPANY is a party to or bound by, nor do there exist any, Material Contracts relating to or in any way affecting the operation or ownership of the COMPANY's business that are of a type described below: (a) any collective bargaining arrangement with any labor union or any such agreement currently in negotiation or proposed; (b) any contract for capital expenditures or the acquisition or construction of fixed assets for or in respect to real property other than in the COMPANY's ordinary course of business in excess of $10,000; (c) any contract with a term in excess of one year for the purchase, maintenance, acquisition, sale or furnishing of materials, supplies, merchandise, machinery, equipment, parts or other property or services (except that the COMPANY need not list any such contract made in the ordinary course of business) which requires aggregate future payments of greater than $10,000; (d) any contract relating to the borrowing of money, or the guaranty of another person's borrowing of money, including, without limitation, all notes, mortgages, indentures and other obligations, agreements and other instruments for or relating to any lending or borrowing, including assumed indebtedness; (e) any contract granting any person a lien on any of the assets of the COMPANY, in whole or in part; (f) any contract granting to any person a first-refusal, first-offer or similar preferential right to purchase or acquire any of the assets of the COMPANY's business other than in the ordinary course of business; (g) any contract under which the COMPANY is (i) a lessee or sublessee of any machinery, equipment, vehicle or other tangible personal property or real property, or (ii) a lessor of any real property or tangible personal property owned by the COMPANY, in either case having an original value in excess of $10,000; (h) any contract providing for the indemnification of any officer, director, employee or other person; (i) any joint venture or partnership contract; and (j) any other contract with a term in excess of one year, whether or not made in the ordinary course of business, which involves or may involve payments in excess of $10,000. The COMPANY has provided ITP with a true and complete copy of each written Material Contract, including all amendments or other modifications thereto. Except as set forth on Schedule 5.11, each Material Contract is a valid and binding obligation of the COMPANY, enforceable in accordance with its terms, and is in full force and effect. Except as set forth on Schedule 5.11, the COMPANY has performed all obligations required to be performed by it under each Material Contract and neither the COMPANY nor, to the knowledge of the COMPANY, any other party to any Material Contract, is (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect thereunder; and there exists no condition which would constitute a breach or default thereunder. The COMPANY has not been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise. 5.12 Real Property. (a) The COMPANY owns no real property. (b) Schedule 5.12(b) includes an accurate list of real property leases to which the COMPANY is a party. Counsel to ITP has been provided with true, complete and correct copies of all leases and agreements in respect of such real property leased by the COMPANY. Except as set forth on Schedule 5.12(b), all of such leases included on Schedule 5.12(b) are in full force and effect and constitute valid and binding agreements of the COMPANY and, to the COMPANY's knowledge, of the parties thereto in accordance with their respective terms. 5.13 Insurance. The COMPANY has delivered to ITP: (a) true and complete copies of all policies of insurance to which the COMPANY is a party or under which the COMPANY, or any director of the COMPANY, is or has been covered at any time since January 1, 1996; (b) true and complete copies of all pending applications for policies of insurance; and (c) any written statement by the auditor of the COMPANY's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. 5.14 Compensation; Employment Agreements; Organized Labor Matters. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.14) showing all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation of each of such persons as of (i) the Balance Sheet Date and (ii) the date hereof. The COMPANY has provided to ITP true, complete and correct copies of any employment agreements for persons listed on Schedule 5.14. Except as set forth on Schedule 5.14, since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases implemented on a basis consistent with past practices, a $20,000 salary increase (from $110,000 to $130,000 per year) in the annual salary paid to each STOCKHOLDER and bonus and dividend distributions to STOCKHOLDERS. Except as set forth on Schedule 5.14, there is no, and within the last three years the COMPANY has not experienced any, strike, picketing, boycott, work stoppage or slowdown, other labor dispute, union organizational activity, allegation, charge or complaint of unfair labor practice, employment discrimination or other matters relating to the employment of labor, pending or, to the COMPANY's knowledge, threatened against the COMPANY. 5.15 Benefit Plans. The COMPANY has delivered to ITP an accurate schedule (which is set forth on Schedule 5.15) showing all Benefit Plans. 5.16 Conformity with Law; Litigation. Except as set forth on Schedule 5.16, to the Company's knowledge, the COMPANY has complied with all laws, rules, regulations, writs, injunctions, decrees, and orders applicable to it or to the operation of its business (collectively, "Laws") and has not received any notice of any alleged claim or threatened claim, violation of, liability or potential responsibility under, any such Law which has not heretofore been cured and for which there is no remaining liability other than, in each case, those not having a Material Adverse Effect. Except to the extent set forth on Schedule 5.16 (which shall disclose the parties to, nature of, and relief sought for each matter disclosed): (a) There is no suit, action, proceeding, investigation, claim or order pending or, to the COMPANY's knowledge, threatened against either the COMPANY or, to the knowledge of the COMPANY, pending or threatened against any of the officers, directors or employees of the COMPANY with respect to its business or proposed business activities which would have a Material Adverse Effect on the COMPANY, or to which the COMPANY is otherwise a party, before any court, or before any Governmental Authority (collectively, "Claims"). (b) The COMPANY is not subject to any judgment, order or decree of any court or Governmental Authority; the COMPANY has not received any opinion or memorandum from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business. The COMPANY is not engaged in any legal action to recover monies due it or for damages sustained by it. 5.17 Taxes. Except as set forth on Schedule 5.17: (a) All Returns required to have been filed by or with respect to the COMPANY and any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member (a "Relevant Group") with any Taxing Authority have been duly filed, and each such Return correctly and completely reflects the Tax liability and all other information required to be reported thereon. All Taxes (whether or not shown on any Return) owed by the COMPANY and any member of a Relevant Group (individually, the "Acquired Party" and collectively, the "Acquired Parties") have been paid on or prior to the due date for payment of such Taxes. (b) To the knowledge of the COMPANY and the STOCKHOLDERS, the provisions for Taxes due by the COMPANY (as opposed to any reserve for deferred Taxes established to reflect timing differences between book and Tax income) in the COMPANY's financial statements are sufficient for all unpaid Taxes, being current taxes not yet due and payable, of such Acquired Party. (c) No Acquired Party is a party to any agreement extending the time within which to file any Return. No claim has ever been made by any Taxing Authority in a jurisdiction in which an Acquired Party does not file Returns that it is or may be subject to taxation by that jurisdiction that is unresolved or if adversely determined would have a Material Adverse Effect on such Acquired Party. (d) Each Acquired Party has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. (e) No Acquired Party expects any Taxing Authority to assess any additional Taxes against or in respect of it for any past period. There is no dispute or claim concerning any Tax liability of any Acquired Party either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to any Acquired Party. No issues have been raised in any examination by any Taxing Authority with respect to any Acquired Party which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. Schedule 5.17 attached hereto lists all federal, state, local and foreign income Tax Returns filed by or with respect to any Acquired Party for all taxable periods ended on or after December 31, 1996, indicates those Returns, if any, that have been audited, and indicates those Returns that currently are the subject of audit. Each Acquired Party has delivered to ITP complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, such Acquired Party since December 31, 1996. (f) No Acquired Party has waived any statute of limitations, the waiver of which remains in effect on the date hereof, in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. (g) No Acquired Party has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could require it to make any payments, that are not deductible under Section 280G of the Code. (h) No Acquired Party is a party to any Tax allocation or sharing agreement. (i) None of the assets of any Acquired Party constitutes tax-exempt bond financed property or tax-exempt use property, within the meaning of Section 168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any "long-term contract" within the meaning of Section 460 of the Code. (j) No Acquired Party is a "consenting corporation" within the meaning of Section 341(f)(1) of the Code, or comparable provisions of any state statutes, and none of the assets of any Acquired Party is subject to an election under Section 341(f) of the Code or comparable provisions of any state statutes. (k) No Acquired Party is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes. (1) Except as provided in the sentence immediately succeeding, there are no accounting method changes or proposed or threatened accounting method changes, of any Acquired Party that could give rise to an adjustment under Section 481 of the Code for periods after the Closing Date. ITP understands, however, that since the COMPANY is a cash basis taxpayer and ITP and its subsidiaries are accrual basis taxpayers, the merger of the COMPANY into NEWCO may give rise to an adjustment under Code Section 481 for periods before or after the Closing Date. (m) No Acquired Party has received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. (n) Each Acquired Party has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662(d) of the Code. (o) No Acquired Party has any liability for Taxes of any person other than such Acquired Party (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise. (p) Prior to ITP's acquisition of the COMPANY pursuant to this Agreement, there currently are no limitations on the utilization of the net operating losses, built-in losses, capital losses, Tax credits or other similar items of any Acquired Party (collectively, the "Tax Losses") under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v) Section 1.1502-15 and Section 1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21 and Section 1.1502-21A of the Treasury regulations or (vii) Sections 1.1502-91 through 1.1502-99 of the Treasury regulations, in each case as in effect both prior to and following the Tax Reform Act of 1986. (q) The fair market value of the assets of the COMPANY as well as the COMPANY's tax basis in such assets exceeds the sum of its liabilities, plus the amount of liabilities, if any, to which the assets are subject. (r) The COMPANY is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 351(e)(2) of the Code. For purposes of this Section 5.17, the following definitions shall apply: "Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax with any Taxing Authority or Governmental Authority. "Tax" or "Taxes" means all Federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum, environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatsoever, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Taxing Authority" means any Governmental Authority, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having jurisdiction with respect to any Tax. 5.18 No Violations. The COMPANY is not in violation of any Charter Document. To the knowledge of the COMPANY, except as set forth on Schedule 5.18, (a) the rights and benefits of the COMPANY under the Material Contracts will not be adversely affected by the transactions contemplated hereby and (b) the execution of this Agreement and the performance by the COMPANY and the STOCKHOLDERS of their obligations hereunder and the consummation by the COMPANY and the STOCKHOLDERS of the transactions contemplated hereby will not (i) result in any violation or breach of, or constitute a default under, any of the terms or provisions of the Material Contracts or the Charter Documents or (ii) require the consent, approval, waiver of any acceleration, termination or other right or remedy or action of or by, or make any filing with or give any notice to, any other party. Except as set forth on Schedule 5.18, none of the Material Contracts requires notice to, or the consent or approval of, any Governmental Authority or other third party with respect to any of the transactions contemplated hereby in order to remain in full force and effect and consummation of the transactions contemplated hereby will not give rise to any right to termination, cancellation or acceleration or loss of any material right or benefit. 5.19 Business Conduct. Except as set forth on Schedule 5.19, since December 31, 1996, the COMPANY has conducted its business only in the ordinary course consistent with past custom and practices and has incurred no liabilities other than in the ordinary course of business consistent with past custom and practices. Except as forth on Schedule 5.19, since December 31, 1996, there has not been any: (a) Material adverse change in the COMPANY's operations, condition (financial or otherwise), operating results, assets, liabilities, employee, customer or supplier relations or business prospects; (b) Loan or advance by the COMPANY to any party in excess of $5,000 in the aggregate other than sales to customers on credit in the ordinary course of business consistent with past custom and practices; (c) Declaration, setting aside, or payment of any dividend or other distribution in respect to the COMPANY's capital stock, any direct or indirect redemption, purchase, or other acquisition of such stock, or the payment of principal or interest on any note, bond, debt instrument or debt to any Affiliate; (d) Incurrence of any debts, liabilities or obligations except current liabilities incurred in connection with or for services rendered or goods supplied in the ordinary course of business consistent with past custom and practices, liabilities on account of taxes and governmental charges but not penalties, interest or fines in respect thereof, and obligations or liabilities incurred by virtue of the execution of this Agreement; (e) Issuance by the COMPANY of any notes, bonds, or other debt securities or any equity securities or securities convertible into or exchangeable for any equity securities; (f) Cancellation, waiver or release by the COMPANY of any debts, rights or claims, except in each case in the ordinary course of business consistent with past custom and practices; (g) Amendment of the COMPANY's Articles of Incorporation or By-Laws; (h) Amendment or termination of any Material Contract, other than expiration of such contract in accordance with its terms; (i) Change in accounting principles, methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) utilized by the COMPANY; (j) Sale or assignment by the COMPANY of any tangible assets other than in the ordinary course of business; (k) Capital expenditures or commitments therefor by the COMPANY other than in the ordinary course of business in excess of $10,000 in the aggregate; (l) Liens with respect to any asset of the COMPANY other than purchase money security interests created in the ordinary course of business; (m) Adoption, amendment or termination of any Benefit Plan; (n) Increase in the benefits provided under any Benefit Plan; or (o) An occurrence or event not included in clauses (a) through (n) that has or might be expected to have a Material Adverse Effect on the COMPANY. 5.20 Prohibited Activities. Except as set forth on Schedule 5.20, the COMPANY has not, between the Balance Sheet Date and the date hereof, taken any of the actions set forth in Section 7.3. 5.21 Misrepresentation. To the knowledge of the COMPANY and the STOCKHOLDERS, none of the representations and warranties set forth in this Agreement, the schedules, certificates, and the other documents furnished by the COMPANY to ITP pursuant hereto, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading. (B) Representations and Warranties of the STOCKHOLDERS. Each STOCKHOLDER severally represents and warrants that the representations and warranties set forth below are true as of the Closing Date. 5.22 Authority; Ownership. Each STOCKHOLDER has the full legal right, subject to spousal consent which is to be provided at or before the Closing Date, power and authority to enter into this Agreement. Each STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.22, such COMPANY Stock is owned free and clear of any and all Liens, voting trusts and restrictions of every kind. 5.23 No Intention to Dispose of ITP Stock. No STOCKHOLDER has any current plan or intention, or is under any binding commitment or contract to sell, exchange or otherwise dispose of shares of ITP Stock received pursuant to Section 3. 6. REPRESENTATIONS AND WARRANTIES OF ITP AND NEWCO ITP and NEWCO jointly and severally represent and warrant to the COMPANY and the STOCKHOLDERS that all of the following representations and warranties in this Section 6 are true as of the Closing Date, and that such representations and warranties shall survive the Closing Date for a period of two years (the "ITP Expiration Date"). 6.1 Due Organization. ITP and NEWCO are each corporations duly incorporated, validly existing and in good standing under the laws of the state of their incorporation, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their business in the places and in the manner as now conducted, to own or hold under lease the properties and assets they now own or hold under lease, and to perform all of their obligations under any material agreement to which they are a party or by which their properties are bound; are duly qualified in the jurisdictions listed in Schedule 6.1 and there are no other jurisdictions in which the conduct of ITP's and NEWCO's business or activities or their ownership of assets requires any other qualification under applicable law, the absence of which would have a Materially Adverse Effect on either ITP's or NEWCO's business. True, complete and correct copies of the Certificate or Articles of Incorporation and Bylaws, each as amended, of ITP and NEWCO (the "ITP Charter Documents") are all attached hereto as Annex II. The minute books and stock records of each of ITP and NEWCO, as heretofore made available to the COMPANY, are correct and complete in all material respects. 6.2 Authorization. The respective representatives of ITP and NEWCO executing this Agreement have the authority to execute and deliver this Agreement and to bind ITP and NEWCO to perform their respective obligations hereunder. The execution and delivery of this Agreement by ITP and NEWCO and the performance by ITP and NEWCO of their respective obligations under this Agreement and the consummation by ITP and NEWCO of the transactions contemplated hereby have been duly authorized by all necessary corporate action by each in accordance with applicable law and the Certificate or Articles of Incorporation and By-Laws of ITP and NEWCO, as the case may be. This Agreement constitutes the valid and binding obligation of ITP and NEWCO, enforceable in accordance with its terms. 6.3 Transaction Not a Breach. Neither the execution and delivery of this Agreement nor their performance will violate, conflict with, or result in a breach of any provision of any Law, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or any Governmental Authority binding on ITP or NEWCO or conflict with or result in the breach of any of the terms, conditions or provisions of the Certificate or Articles of Incorporation or the By-Laws of ITP or NEWCO or of any contract, agreement, mortgage or other instrument or obligation of any nature to which ITP or NEWCO is a party or by which ITP or NEWCO is bound. 6.4 Misrepresentation. To the knowledge of ITP, none of the representations and warranties set forth in this Agreement or in any of the certificates, schedules, exhibits, lists, documents, exhibits, or other instruments delivered, or to be delivered, to the COMPANY as contemplated by any provision hereof, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 6.5 Capital Stock. The entire authorized capital stock of ITP consists of ten million shares of ITP Stock and two million shares of Preferred Stock. All of the issued and outstanding shares of capital stock of ITP are set forth in Annex V. Except as disclosed on Schedule 6.5, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements to which ITP is a party requiring or restricting issuance, sale or transfer of any equity securities of ITP or any securities convertible directly Philip Tomasi ---------------------------------(SEAL) Charles Menzel EX-10.7 16 KANDL BUSINESS COMBINATION AGREEMENT BUSINESS COMBINATION AGREEMENT Dated as of May 29, 1997 By and Among IT PARTNERS INC. and KANDL DATA PRODUCTS, INC. and MARTIN KANDL and HAEYOUNG P. KANDL TABLE OF CONTENTS PAGE ARTICLE I. DEFINITIONS Section 1.1. Adjustment Amount.. . . . . . . . . . . . . . . .4 Section 1.2. Affiliate . . . . . . . . . . . . . . . . . . . .4 Section 1.3. Balance Sheet . . . . . . . . . . . . . . . . . .5 Section 1.4. Benefit Arrangements. . . . . . . . . . . . . . .5 Section 1.5. Buyer . . . . . . . . . . . . . . . . . . . . . .5 Section 1.6. Buyer's Accountants . . . . . . . . . . . . . . .5 Section 1.7. Citibank Rate . . . . . . . . . . . . . . . . . .5 Section 1.8. Closing . . . . . . . . . . . . . . . . . . . . .5 Section 1.9. Closing Balance Sheet . . . . . . . . . . . . . .5 Section 1.10. Closing Date. . . . . . . . . . . . . . . . . . .5 Section 1.11. Code. . . . . . . . . . . . . . . . . . . . . . .5 Section 1.12. Confidentiality Agreement . . . . . . . . . . . .5 Section 1.13. Corporation . . . . . . . . . . . . . . . . . . .5 Section 1.14. Dispute Resolution Firm . . . . . . . . . . . . .5 Section 1.15. Employee. . . . . . . . . . . . . . . . . . . . .5 Section 1.16. Employee Benefit Plan . . . . . . . . . . . . . .6 Section 1.17. ERISA . . . . . . . . . . . . . . . . . . . . . .6 Section 1.18. Exhibit . . . . . . . . . . . . . . . . . . . . .6 Section 1.19. Final Closing Balance Sheet . . . . . . . . . . .6 Section 1.20. Final Net Asset Value . . . . . . . . . . . . . .6 Section 1.21. Financials Date . . . . . . . . . . . . . . . . .6 Section 1.22. Guarantees. . . . . . . . . . . . . . . . . . . .6 Section 1.23. Individual Returns. . . . . . . . . . . . . . . .6 Section 1.24. Individual Taxes. . . . . . . . . . . . . . . . .6 Section 1.25. Intellectual Property . . . . . . . . . . . . . .6 Section 1.26. IRS . . . . . . . . . . . . . . . . . . . . . . .6 Section 1.27. Material. . . . . . . . . . . . . . . . . . . . 6- Section 1.28. Material Adverse Effect . . . . . . . . . . . . .7 Section 1.29. Material Contracts. . . . . . . . . . . . . . . .7 Section 1.30. [intentionally deleted] . . . . . . . . . . . . .7 Section 1.31. Net Asset Value . . . . . . . . . . . . . . . . .7 Section 1.32. Offering Memorandum . . . . . . . . . . . . . . .7 Section 1.33. Other Company . . . . . . . . . . . . . . . . . .7 Section 1.34. [intentionally deleted] . . . . . . . . . . . . .7 Section 1.35. PBGC. . . . . . . . . . . . . . . . . . . . . . .7 Section 1.36. Person. . . . . . . . . . . . . . . . . . . . . .7 Section 1.37. Proposed Closing Balance Sheet. . . . . . . . . .7 Section 1.38. [intentionally deleted] . . . . . . . . . . . . .7 Section 1.39. Purchase Price. . . . . . . . . . . . . . . . . .7 Section 1.40. Retirement Plan . . . . . . . . . . . . . . . . .7 Section 1.41. Schedule. . . . . . . . . . . . . . . . . . . . .8 Section 1.42. Securities Act. . . . . . . . . . . . . . . . . .8 Section 1.43. Seller. . . . . . . . . . . . . . . . . . . . . .8 Section 1.44. Seller's Accountants. . . . . . . . . . . . . . .8 Section 1.45. Senior Debt . . . . . . . . . . . . . . . . . . .8 Section 1.46. Shares. . . . . . . . . . . . . . . . . . . . . .8 Section 1.47. Subsidiary. . . . . . . . . . . . . . . . . . . .8 Section 1.48. Transaction Documents . . . . . . . . . . . . . .8 ARTICLE II: PURCHASE AND SALE OF SHARES Section 21. Sale. . . . . . . . . . . . . . . . . . . . . . .8 Section 2.2 Purchase Price and Allocation . . . . . . . . . .8 Section 6.6. Nondisposition of Shares. . . . . . . . . . . . 23 Section 6.7 Put Option. . . . . . . . . . . . . . . . . . . 23 ARTICLE VII: CONDITIONS OF OBLIGATIONS OF BUYER Section 7.1. Representations and Warranties True . . . . . . 24 Section 7.2. Covenants and Agreements-No Default . . . . . . 24 Section 7.3. [intentionally deleted] . . . . . . . . . . . . 24 Section 7.4. No Material Adverse Change. . . . . . . . . . . 24 Section 7.5. Consents. . . . . . . . . . . . . . . . . . . . 24 Section 7.6. Transaction Documents . . . . . . . . . . . . . 25 Section 7.7. Adverse Proceedings . . . . . . . . . . . . . . 25 ARTICLE VIII: CONDITIONS OF OBLIGATIONS OF SELLER Section 8.1. Representations and Warranties True . . . . . . 25 Section 8.2. Covenants and Agreements--No Default. . . . . . 25 Section 8.3. Officer's Certificates. . . . . . . . . . . . . 25 Section 8.4. Consents. . . . . . . . . . . . . . . . . . . . 25 Section 8.5. Other Transactions. . . . . . . . . . . . . . . 26 Section 8.6. Transaction Documents . . . . . . . . . . . . . 26 Section 8.7. Adverse Proceedings . . . . . . . . . . . . . . 26 Section 8.8 Board/Executive Committee . . . . . . . . . . . 26 ARTICLE IX. REGISTRATION RIGHTS [intentionally deleted] ARTICLE X. PURCHASE AND SALE OF SHARES Section 10.1. Closing . . . . . . . . . . . . . . . . . . . . 26 Section 10.2. Documents to be Delivered by Seller . . . . . . 27 Section 10.3. Documents to be Delivered by Buyer. . . . . . . 27 ARTICLE XI. MISCELLANEOUS Section 11.1. Survival of Representations Warranties, Covenants and Agreements. . . . . . . . . . . . 28 Section 11.2. Indemnification . . . . . . . . . . . . . . . . 28 Section 11.3. Disclaimer of Other Representations and Warranties by Seller. . . . . . . . . . . . . . 30 Section 11.4. Disclosure. . . . . . . . . . . . . . . . . . . 30 Section 11.5. Expenses and Taxes. . . . . . . . . . . . . . . 30 Section 11.6. Special Indemnification for Tax Liabilities . . 30 Section 11.7. Entire Agreement. . . . . . . . . . . . . . . . 32 Section 11.8. Amendment and Waiver. . . . . . . . . . . . . . 33 Section 11.9. Binding Agreement and Successors. . . . . . . . 33 Section 11.10. No Third Party Beneficiaries . . . . . . . . . 33 Section 11.11. Notices. . . . . . . . . . . . . . . . . . . . .33 Section 11.12. Further Assurances . . . . . . . . . . . . . . .34 Section 11.13. Article and Section Headings . . . . . . . . . .34 Section 11.14. Governing Law. . . . . . . . . . . . . . . . . .34 Section 11.15. Courts . . . . . . . . . . . . . . . . . . . . .34 Section 11.16. Construction . . . . . . . . . . . . . . . . . .34 Section 11.17. Counterparts . . . . . . . . . . . . . . . . . .35 SCHEDULES PAGE Schedule 3.1. Organization and Good Standing. . . . .S Schedule 3.2. Restrictions. . . . . . . . . . . . . .S Schedule 3.5. Consents. . . . . . . . . . . . . . . .S Schedule 3.6. Balance Sheet . . . . . . . . . . . . .S Schedule 3.7. Recent Changes. . . . . . . . . . . . .S Schedule 3.8. Litigation. . . . . . . . . . . . . . .S Schedule 3.9. Properties. . . . . . . . . . . . . . .S Schedule 3.10. Intellectual Property. . . . . . . . . S Schedule 3.11. Contracts. . . . . . . . . . . . . . . S Schedule 3.12. Employee Benefit Matters . . . . . . . S Schedule 3.13. Guarantees by Others . . . . . . . . . S Schedule 3.14. Tax Matters. . . . . . . . . . . . . . S Schedule 3.15. Noncompliance. . . . . . . . . . . . . S Schedule 3.16. Permits. . . . . . . . . . . . . . . . S Schedule 3.17. Environmental Matters. . . . . . . . . S Schedule 3.18. Insurance. . . . . . . . . . . . . . . S Schedule 3.19. Banks; Powers of Attorney. . . . . . . S Schedule 4.3(b) List of Buyer's Shareholders. . . . . .S Schedule 4.9. Other Documents . . . . . . . . . . . .S Schedule 5.2. Conduct of Business . . . . . . . . . .S Schedule11.2. Indemnification Share Valuation . . . .S Exhibit A Balance Sheet . . . . . . . . . . . . . . . E Exhibit B Shareholder Agreement . . . . . . . . . . . E Exhibit C ITP 1997 Long-Term Incentive Plan . . . . . E Exhibit D Opinion of Shaw, Pittman, Potts & TrowbridgeE Exhibit E Opinion of Semmes Bowen & Semmes. . . . . . E Exhibit F Promissory Note . . . . . . . . . . . . . . E Exhibit G Articles of Incorporation of Buyer. . . . . E Exhibit H Bylaws of Buyer . . . . . . . . . . . . . . E Exhibit J Stock Repurchase Agreement. . . . . . . . . E BUSINESS COMBINATION AGREEMENT This BUSINESS COMBINATION AGREEMENT ("Agreement") is made as of May 29, 1997, by and among KANDL DATA PRODUCTS, INC., a Maryland corporation with its principal office at 12104 Indian Creek Court, Suite H, Beltsville, Maryland 20705 the "Corporation") and MARTIN KANDL and HAEYOUNG P. KANDL, individuals who reside at 10700 Harper Avenue, Silver Spring, Maryland 20901 (collectively, such individuals are hereafter referred to as the "Seller"), and IT PARTNERS INC., a Delaware corporation with its principal office at 1006 Highland Drive, Silver Spring, Maryland 20910("Buyer"). W I T N E S S E T H: WHEREAS, Seller owns all of the issued and outstanding capital stock of the Corporation; WHEREAS, the Corporation is engaged in the design, manufacture and sale of products and services to the information technology industry; WHEREAS, Seller and Buyer desire to accomplish a business combination consistent with Section 351 of the Internal Revenue Code of 1986, as amended, in connection with which Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, in accordance with the terms and conditions of this Agreement, all of the issued and outstanding shares of capital stock of the Corporation; NOW THEREFORE, in consideration of the mutual covenants and agreements of the parties contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: Section 1.1 Adjustment Amount. "Adjustment Amount" shall mean $109,000.00. Section 1.2. Affiliate. "Affiliate" shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. For purposes of determining whether a Person is an Affiliate, the term "control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, contract or otherwise but shall not include either Creditanstalt Corporate Finance, Inc. or Creditanstalt-Bankverein in their capacities as Lender, Agent or Issuing Bank under, and as such term is defined in, the Loan and Security Agreement among the Buyer, the lenders named therein, Creditanstalt-Bankverein as the Issuing Bank and Creditanstalt Corporate Finance, Inc. as agent for such lenders. Section 1.3. Balance Sheet. "Balance Sheet" shall mean the audited statement of net assets and liabilities of the Corporation as at February 28, 1997 which has been prepared by Ernst & Young at the request of Buyer, a copy of which is attached hereto as Exhibit A. Section 1.4. Benefit Arrangements. "Benefit Arrangements" shall mean all profit sharing, life, health, hospitalization, savings, bonus, deferred compensation, incentive compensation, severance pay, disability, vacation, sick pay, holiday and fringe benefit plans, individual employment and severance contracts and other policies and practices of the Corporation, or any Affiliate thereof, providing employee or executive compensation or benefits to Employees or beneficiaries of Employees, other than Retirement Plans. Section 1.5. Buyer. "Buyer" shall have the meaning set forth above. Section 1.6. Buyer's Accountants. "Buyer's Accountants" shall mean the independent accounting firm of Ernst & Young, LLP. Section 1.7. Citibank Rate. "Citibank Rate" shall mean the rate announced from time to time by Citibank, N.A. as its prime commercial lending rate in New York City, New York (U.S.A.) Section 1.8. Closing. "Closing" shall mean the consummation of the events described in ARTICLE X. Section 1.9. Closing Balance Sheet. "Closing Balance Sheet" shall mean the statement of net assets and liabilities of the Corporation as at the Closing Date as prepared and delivered in accordance with Section 2.4. Section 1.10. Closing Date. "Closing Date" shall mean the date on which the Closing shall occur. Section 1.11. Code. "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.12. Confidentiality Agreement. "Confidentiality Agreement" shall mean the Confidentiality Agreement dated as of November 19, 1996 between Daniel F. Klein, Jamie Blech, the Corporation and Martin Kandl. Section 1.13. Corporation. "Corporation" shall have the meaning set forth above. Section 1.14. Dispute Resolution Firm. "Dispute Resolution Firm" shall mean the independent accounting firm of Arthur Andersen LLP. Section 1.15. Employee. "Employee" shall mean each person who is a current employee, former employee or retired employee of the Corporation or its predecessors. Section 1.16. Employee Benefit Plan. "Employee Benefit Plan" shall mean each "employee benefit plan," as defined in Section 3(3) of ERISA, maintained or contributed to by the Corporation or any Affiliate thereof, which provides benefits to Employees, but excluding Multiemployer Plans Section 1.17. ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. Section 1.18. Exhibit. "Exhibit" shall mean an exhibit to this Agreement. Section 1.19. Final Closing Balance Sheet. "Final Closing Balance Sheet" shall have the meaning set forth in Section 2.3. Section 1.20. Final Net Asset Value. "Final Net Asset Value" shall mean the Net Asset Value as finally determined pursuant to Section 2.3(a), whether by failure of Seller to deliver notice of objection, by agreement of the parties, or by final determination of the Dispute Resolution Firm. Section 1.21. Financials Date. "Financials Date" shall mean February 28, 1997. Section 1.22. Guarantees. "Guarantees" shall mean any obligations, contingent or otherwise, of a Person in respect of any indebtedness, obligation or liability of another Person, including but not limited to direct or indirect guarantees, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, take-or-pay agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received. Section 1.23. Individual Returns. "Individual Returns" shall have the meaning set forth in Section 3.14. Section 1.24. Individual Taxes. "Individual Taxes" shall have the meaning set forth in Section 3.14. Section 1.25. Intellectual Property. "Intellectual Property" shall mean patents, patent applications, trademark registrations and applications therefor, service mark registrations and applications therefor, copyright registrations and applications therefor and trade names. Section 1.26. IRS. "IRS" shall mean the Internal Revenue Service. Section 1.27. Material. "Material" (or "Materiality") when used with reference to information, a fact or circumstance, a course of action, a decision-making process, or other matter shall be limited to information, facts and circumstances, courses of action, decision-making process or other matters as to which there is a substantial likelihood that a reasonable purchaser of the Shares would attach importance in determining whether to purchase the Shares. Section 1.28. Material Adverse Effect. "Material Adverse Effect" when used with reference to a Person shall mean a material adverse effect on the business, properties (taken as a whole) or financial condition of the Person or Persons. Section 1.29. Material Contracts. "Material Contract" shall mean the contracts, agreements, commitments or other arrangements listed in Schedule 3.13. Section 1.30. [intentionally deleted] Section 1.31. Net Asset Value. "Net Asset Value" shall mean total assets minus total liabilities, as shown on the Proposed Closing Balance Sheet or the Final Closing Balance Sheet, as the case may be, each of which shall be prepared on a basis consistent with the Balance Sheet. "Net Asset Value," when used with reference to the Net Asset Value of the Corporation on February 28, 1997, shall mean $673,071. Section 1.32. Offering Memorandum. "Offering Memorandum" shall mean the Confidential Memorandum prepared by Ernst & Young, LLP dated 1997. Section 1.33. Other Company. "Other Company" shall mean C. N. S., Inc. Section 1.34. [intentionally deleted] Section 1.35. PBGC. "PBGC" shall mean the Pension Benefit Guaranty Corporation. Section 1.36. Person. "Person" shall mean any individual, corporation, unincorporated association, business trust, estate, partnership, trust, State, the United States or any other entity. Section 1.37. Proposed Closing Balance Sheet. "Proposed Closing Balance Sheet" shall mean the proposed Closing Balance Sheet, as set forth in Section 2.3. Section 1.38. [intentionally deleted] Section 1.39. Purchase Price. "Purchase Price" shall have the meaning set forth in Section 2.2. Section 1.40. Retirement Plan. "Retirement Plan" shall mean any plan, fund, program or policy which provides retirement income to an Employee or results in a deferral of income by an Employee for periods extending to or beyond the termination of employment of the Employee by Seller and all Affiliates thereof, and pursuant to which the Corporation or an Affiliate thereof has paid benefits or contributed funds or has an obligation to pay benefits or contribute funds in respect of such Employee. Section 1.41. Schedule. "Schedule" shall mean a schedule to this Agreement. Section 1.42. Securities Act. "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.43. Seller. "Seller" shall have the meaning set forth above. Section 1.44. Seller's Accountants. "Seller's Accountants" shall mean the independent accounting firm, if any, selected by Seller. Section 1.45. Senior Debt. "Senior Debt" shall mean the loan from CreditanstaltBankverein in the principal amount of $10,000,000 or such larger amount as Buyer and Creditanstalt-Bankverein shall agree to. Section 1.46. Shares. "Shares" shall mean all of the issued and outstanding shares of stock of the Corporation. Section 1.47. Subsidiary. "Subsidiary," as it relates to any Person, shall mean a corporation more than 50% of whose outstanding securities the Person has the right, other than as affected by events of default, directly or indirectly, to vote for the election of directors. Section 1.48. Transaction Documents. "Transaction Documents" shall mean all other agreements, documents or instruments to be executed by the Seller and the Buyer in connection with this Agreement. ARTICLE II PURCHASE AND SALE OF SHARES Section 21. Sale. On the terms and subject to the conditions set forth in this Agreement, Seller hereby agrees to sell, transfer, assign and deliver to Buyer or one or more of its designated subsidiaries free and clear of any lien, security interest, charge, encumbrance or claim, and Buyer hereby agrees to purchase from Seller the Shares on the Closing Date. Section 2.2 Purchase Price and Allocation. The entire consideration to be paid by Buyer to Seller in exchange for the sale, transfer, assignment and delivery to Buyer of the Shares shall be $3,791,934 (the "Pre-adjusted Purchase Price') and Adjustment Amount (collectively, the Pre-adjusted Purchase Price and the Adjustment Amount are referred to as the Purchase Price"). The Purchase Price shall be paid by Buyer to Seller at the time of Closing in the following manner: As to cash, the amount of $1,895,967 plus the Adjustment Amount by wire transfer of immediately available funds into an account or accounts designated by Seller; as to debt, a Promissory Note made by Buyer in favor of Seller in the principal amount of $568,790, a copy of which is attached hereto as Exhibit F; and as to equity, 365,435 shares of the common stock of Buyer. Seller acknowledges that 100,000 shares of Buyer common stock shall be issued by Buyer to Seller at closing in connection with the delivery, of the Stock Repurchase Agreement in the form of Exhibit attached hereto, pursuant to Section 10.3(f) hereof. Section 2.3. Adjustment of Purchase Price. (a) As promptly as practicable, and in any event not more than 90 days following the Closing Date, Buyer together with Buyer's Accountants shall prepare and deliver to Seller and Seller's Accountants the Proposed Closing Balance Sheet The Proposed Closing Balance Sheet shall be prepared on a basis consistent with and as provided in, the Balance Sheet, including use of c same methodology and maintenance of all reserves at no higher than the level provided for in the Balance Sheet (except that it shall include the net book value at Closing of all work-in-process and finished products), shall be unaudited and shall be accompanied by any supporting reports or documentation prepared by Buyer's Accountants. The Proposed Closing Balance Sheet shall be prepared solely the purpose of determining whether the Corporation's Net Asset Value, as reflected in the Balance Sheet has changed since February 28, 1997. The parties acknowledge that no additional adjustments which may have been necessary as of February 28, 1997 on the Balance Sheet shall be included or reflected on the Proposed Closing Balance Sheet or taken into account in the determination of the Final Net Asset Value. In calculating the Corporation's earnings for the period through the Closing, no amount shall be reflected as accrued or expensed for any legal fees incurred in connection with this transaction, although the Corporation shall bear all such legal fees pursuant to Section 11.5 hereof. (b) (i) Seller may dispute the Proposed Closing Balance Sheet prepared by Buyer and Buyer's Accountants by notifying Buyer and Buyer's Accountants in writing, setting forth in reasonable detail the amount(s) in dispute and the basis for such dispute, within 60 days of Seller's receipt of the Proposed Closing Balance Sheet. If Seller fails to deliver a notice of objections within such 60-day period, Seller shall be deemed to have accepted the Proposed Closing Balance Sheet and the Net Asset Value thereon. In the event the aggregate amounts in dispute are less than $50,000, the Net Asset Value proposed by Buyer and Buyer's Accountants shall be adjusted by one-half of the dispute amount, and such resolution shall be final, binding and conclusive on Seller and Buyer. (ii) In the event the amounts in dispute exceed' $50,000, Buyer and Seller shall attempt in good faith to resolve such dispute, and any resolution by them as to any disputed amount(s) shall be final, binding and conclusive on Seller and Buyer. If Buyer and Seller do not resolve any such dispute within 15 days of the date of receipt by Buyer of Seller's written notice of dispute, Buyer and Seller shall, within five additional days, retain the Dispute Resolution Firm, which firm shall, within 30 days of each submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive on Seller and Buyer. Such resolution shall be within the range of amounts defined by the amount proposed by Buyer's Accountants and the amount proposed by Seller as to each disputed item. The fees and disbursements of the Dispute Resolution Firm shall be borne by Buyer and Seller in the proportion that the aggregate amount of disputed items submitted to the Dispute Resolution Firm that is unsuccessfully disputed by each party (as finally determined by the Dispute Resolution Firm) bears to the total amount of the disputed items as submitted to the Independent Accounting Firm. After resolving the items in dispute, the Dispute Resolution Firm shall prepare and deliver to each of Seller and Buyer the Final Closing Balance Sheet and a certification of the Net Asset Value thereon. (c) In the event that the Final Net Asset Value is less than the Net Asset Value stated on the Balance Sheet, Seller shall pay to Buyer the difference plus interest thereon from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the Citibank Rate. In the event that the Final Net Asset Value is greater than the Net Asset Value stated on the Balance Sheet, Buyer shall pay to Seller the difference, plus interest on such amount from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the Citibank Rate. Such payment shall be made in immediately available funds not later than two business days after the determination of the Final Net Asset Value by wire transfer to a bank account designated by the party entitled to receive the payment. (d) Any payment made pursuant to Section 2.3(c) shall be treated as an increase or decrease, as the case may be, to the Purchase Price. Section 2.4 Board of Directors Membership: Amendments to Buyer's By-laws. Immediately following Closing, Buyer shall take such corporate action as may be necessary to cause a designee of Seller to become a member of Buyer's Board of Directors (the "Board"), and, if necessary, to reelect such designee, or another designee of Seller, to continue to serve on the Board, as provided in a certain Stockholder Agreement to be executed by the parties hereto and certain other parties contemporaneously herewith. Such Stockholder Agreement is attached hereto as Exhibit B. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to Buyer as follows: Section 3.1. Organization and Good Standing. The Corporation is duly organized, validly existing and in good standing under the laws of the State of Maryland. The Corporation has full corporate power and authority to carry on its business as it is now being conducted. The Corporation is qualified as a foreign corporation in, and is in good standing under the laws of, each state set forth in Schedule 3.1, which are the only jurisdictions in which the failure of the Corporation to be so qualified would have a Material Adverse Effect on the Corporation. Section 3.2. Capitalization. The authorized capital stock of the Corporation consists of 1,000 shares of common Stock, no par value, all of which shares are outstanding. Each of the outstanding Shares has been duly authorized and validly issued and is fully paid and nonassessable. No shares of capital stock of the Corporation are held in treasury, and there are no other issued or outstanding equity securities of the Corporation and no other issued or outstanding equity securities of the Corporation convertible at any time into equity securities of the Corporation. Neither Seller nor the Corporation is subject to any commitment or obligation that would require the issuance or sale of additional shares of capital stock of the Corporation at any time under options, subscriptions, warrants, rights or any other obligations. Neither the execution and delivery of this Agreement and the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will (a) violate any of the provisions of the charter or bylaws of the Corporation, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, permit or license or any statute, rule or regulation of any governmental body, or any agreement, indenture, mortgage or instrument to which Seller, or the Corporation is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on the Corporation or Seller. Section 3.3. Ownership of the Shares. Seller is the record and beneficial owner of the Shares, which are free and clear of any lien, security interest, charge, encumbrance or claim, and Seller has, or will have on the Closing Date, the right to transfer to Buyer complete and encumbered legal and equitable title to the Shares. Section 3.4. Execution and Effect of Agreement. Seller has the ability and authority to enter into and consummate this Agreement and the Transaction Documents, and the execution and delivery of such agreements and the consummation of the transactions completed hereby have, if and to the extent necessary, been duly authorized. This Agreement has been duly executed and delivered by the Seller, and constitutes a legal, valid and binding obligation of each such Persons as constitute the Seller executing such Agreement subject to such applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principals of equity (whether applied by a court of law or of equity). Section 3.5. Consents. Except (a) for filings, consents, approvals and authorizations that the failure to obtain or make would not have a Material Adverse Effect on the Corporation, or (b) as set forth in Schedule 3.5, no consent, waiver, approval or authorization of any governmental authority or of any third party or notice to or filing with any governmental authority or any third party, on the part of Seller, or the Corporation is required in connection with the execution and delivery by Seller of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 3.6. Balance Sheet. Except as set forth in Schedule 3.6, the Balance Sheet fairly presents the Corporation's financial condition as at the Financials Date, provided that the parties acknowledge that the Balance Sheet has been prepared by Buyer's Accountants and, accordingly, Seller makes no representation as to whether such Balance Sheet and the information contained therein has been presented in accordance with generally accepted accounting principles. The Corporation has no Material liabilities or obligations, whether contingent or absolute, direct or indirect, matured or unmatured, which are not shown or provided for on the Balance Sheet or the notes thereto, except for those which have arisen since the date of the Balance Sheet in the ordinary course of business or are set forth on Schedule 3.6, or any other Schedule to this Agreement, and Seller knows of no reasonable basis (as determined in Seller's reasonable judgment) for the assertion of any such liabilities or obligation. Section 3.7. Absence of Certain Changes. Since February 28, 1997, except as disclosed on Schedule 3.7 or as otherwise contemplated by this Agreement, there has not been: (a) any change in the assets, liabilities, business, properties or operations of the Corporation, other than changes (i) described in the Schedules or (ii) made or incurred in the ordinary course of business, which taken in the aggregate have had a Material Adverse Effect on the Corporation; (b) any dividend or other distribution declared, paid or made on or in respect of the capital stock of the Corporation; (c) any employment or other contract or commitment entered into by the Corporation, except in the ordinary course of business; (d) a cancellation of any claim of or debts owed to the Corporation, except in the ordinary course of business: (e) excluding any inventory or obsolete assets disposed of in the ordinary course of business, any sale, assignment, transfer or other disposition of (i) any Intellectual Property, the latest cost of which on the accounting records of the Corporation exceeds $2,500 or (ii) any other assets, the latest cost of which on the accounting records of the Corporation exceeds $2,500; (f) any capital expenditure, capital addition or capital improvement by the Corporation involving an amount in excess of $100,000; (g) any mortgage, lien, pledge, encumbrance or security interest created on any assets, tangible or intangible, except purchase money security interests created in the ordinary course of business; (h) any damage, destruction or loss (whether or not covered by insurance) which would have a Material Adverse Effect on the Corporation; (i) any labor disturbances which would have a Material Adverse Effect on the Corporation; or (j) to Seller's knowledge, any other event or condition which has had or, in the reasonable judgment of Seller, would likely have a Material Adverse Effect on the Corporation. Section 3.8. Litigation. Except as set forth in Schedule 3.8, Schedule 3.15 or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending or, to the knowledge of Seller, threatened by or before any court, any governmental or administrative agency or commission, or arbitrator, against Seller or the Corporation, in respect of this Agreement or any of the transactions contemplated hereby that would prevent a consummation of any of the transactions contemplated hereby. Except as set forth in Schedule 3.8, Schedule 3.15, or Schedule 3.17, there is no action at law or in equity, arbitration proceeding or governmental investigation pending, or to the knowledge of Seller threatened, by or before any court, any governmental or administrative agency or commission, or arbitrator against or involving any of the businesses, properties, rights or assets of the Corporation or its Affiliates, employees or agents, which reasonably could be expected to have a Material Adverse Effect on the Corporation. Section 3.9. Properties: Absence of Encumbrances. Schedule 3.9 sets forth a complete list of all real property leased, or used by the Corporation. With respect to leasehold interests: (a) the leases are in full force and effect and constitute valid and enforceable leasehold interests of the Corporation, free and clear of all liens, claims, security interests, encumbrances or mortgages created by Seller that would have a Material Adverse Effect on the Corporation, (b) the Corporation is not in default and has not received any written notice of default under any lease where there reasonably could be expected to be a Material Adverse Effect on the Corporation, and (c) to the knowledge of Seller there is no event which with notice or lapse of time or both would constitute such a default by the Corporation or by a lessor. Section 3.10. Intellectual Property. Schedule 3.10 sets forth a complete list of all Material Intellectual Property of the Corporation on the date hereof and of all license agreements pursuant to which any such Intellectual Property is licensed (a) by or to the Corporation. The Corporation does not own, license or, to Seller's knowledge, use Intellectual Property Material to the continued operation of its business that is not listed on Schedule 3.10. Except as otherwise indicated in Schedule 3. 10, the Corporation owns the Intellectual Property listed in Schedule 3.10 free and clear of any royalty, lien, encumbrance or charge. Notwithstanding anything to the contrary contained herein, Seller make no representation or warranty, and no such representation or warranty shall be implied, that any of the Intellectual Property is valid or enforceable. To the knowledge of Seller, except as set forth in Schedule 3.8 or Schedule 3.10, the Corporation has not received within the two-year period immediately preceding the date of this Agreement any notice or claim that any such Intellectual Property is not valid or enforceable, or of any infringement upon or conflict with any patent, trademark, service mark, copyright or trade name of any third party by the Corporation or of any claim by any third party alleging any such infringement or conflict. To the knowledge of Seller, except as set forth in Schedule 3.8 or Schedule 3.10, during the two-year period immediately preceding the date of this Agreement the Corporation has not given any notice of infringement to any third party with respect to any of the Intellectual Property listed in Schedule 3.10. Section 3.11. Contracts. Except for contracts, agreements, commitments or other arrangements set forth on Schedule 3.11 or other Schedules, as of the date of this Agreement the Corporation is not a party to or obligated by any: (a) Benefit Arrangements providing for aggregate payments of $2,500 or more in any 12-month period or any contract with employees, consultants or agents not terminable at will without cost or other liability by reason of such termination; (b) collective bargaining agreement; (c) guarantees by the Corporation of any obligation for the borrowing of $2,500 in the aggregate; (d) indentures, notes, mortgages, installment obligations, capital leases or other instruments relating to the borrowing of money in excess of $2,500 in the aggregate; (e) agreement, contract or lease (excluding open purchase orders and supply agreements entered into in the ordinary course of business) that involves the receipt or payment by the Corporation within one year of more than $100,000; and (f) executory contracts involving the acquisition or disposition of Material tangible or intangible assets other than in the ordinary course of business. Except as disclosed on Schedule 3.8 or as would not have a Material Adverse Effect on the Corporation, the Corporation is not in default under any Material Contract, has not waived any Material rights under any such Material Contract and (to the knowledge of Seller) has no knowledge or notice that any party with whom it has a Material Contract is in default under any Material Contract. Section 3.12. Employees; Employee Benefit Matters. (a) Schedule 3.12 to this Agreement contains a true and complete list of all sales agents, consultants and employees of the Corporation (whether employed or engaged by written or oral agreement), their respective rates of compensation and any general or Material individual wage increase scheduled to take effect prior to Closing other than in the ordinary course of business. The Corporation has paid in full such employees, agents and consultants, or adequately reserved for, all wages, salaries, commissions, bonuses and other compensation for all services performed by them, except for such payments as are not yet due; and the Corporation is in compliance in all material respects with all laws and regulations respecting employment and employment practices, terms and conditions or employment, wages and hours, employee benefit plans and taxes (including withholding taxes) relating to employment. (b) Schedule 3.12 sets forth a list of all Employee Benefit Plans, all Material Benefit Arrangements, all Multiemployer Plans, and all Retirement Plans. Except as set forth in Schedule 3.12, with respect to each of such Employee Benefit Plans, Benefit Arrangements and Retirement Plans, Seller has delivered or made available to Buyer, as and if applicable, copies of (i) the text or formal plan document, including amendments and the summary plan description, (ii) the most recent IRS determination letter relating to the qualification of Retirement Plans under Section 401 of the Code and the related trust's qualification under Section 501 of the Code, (iii) the trust agreements, insurance contracts or other documents that constitute all or a part of the funding vehicle, (iv) in the case of all Employee Benefit Plans, the most recent annual reports (IRS Form 5500s), including the schedules thereto, and (v) the most recent actuarial reports or other financial reports. (c) Except as set forth in Schedule 3.12, (i) all Employee Benefit Plans comply in all Material respects with ERISA and the Code; (ii) the Corporation and its Affiliates have paid all contributions due under any of the Employee Benefit Plans and Multiemployer Plans to which they are required to contribute; and (iii) the Corporation and its Affiliates do not have minimum funding deficiencies or Multiemployer Plan withdrawal liabilities (including without limitation liabilities imposed by virtue of any other member of a controlled group having such liabilities imposed on it). (d) Except as set forth in Schedule 3.12, there are no Material actions, suits or claims pending or, to the knowledge of Seller, threatened against any Employee Benefit Plan, any Retirement Plan, any Benefit Arrangement, or any administrator or fiduciary thereof, other than benefit claims arising in the normal course of operation of such Employee Benefit Plans, Benefit Arrangements, or Retirement Plans. (e) To the knowledge of Seller, the Corporation has not engaged in any non-exempt "Prohibited Transaction," as defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any Employee Benefit Plan or with respect to any other parties-in-interest. Section 3.13. Guarantees by Others. Schedule 3.13 sets forth a complete list as of the date hereof of all Guarantees of Seller and its Affiliates for the benefit of Persons doing business with the Corporation. Section 3.14. Tax Matters. (a) Except as set forth in Schedule 3.14, the Corporation has filed (including extensions) all federal, state, local, and other tax returns (the "Individual Returns") required to be filed by it under applicable law, including estimated tax returns and reports, and the Corporation has paid all required Material federal, state and local income and other applicable taxes, additions to such taxes, penalties and interest with respect thereto (the "Individual Taxes") due and payable on or before the date hereof (and will duly and timely pay all such amounts required to be paid between the date hereof and the Closing Date). (b) The Corporation has delivered or made available (or will make available prior to Closing) to Buyer copies of all tax returns filed by the Corporation for all tax years beginning with the year ended September 30, 1994, together with all tax basis fixed asset schedules and any information necessary to document differences between tax basis accounting and accounting reflected on the Balance Sheet and related income statements. (c) No Material proposed taxes, addition to tax, interest, or penalties have been asserted against the Corporation except those that have been paid in full, those that would not have a Material Adverse Effect on the Corporation, and those as set forth in Schedule 3.14. There are no agreements, waivers, or other arrangements providing for extensions of time in respect of the assessment or collection of any unpaid tax against the Corporation, except as set forth in Schedule 3.14. (d) No election or consent under Section 341(f) of the Code has been made or shall be made on or prior to the Closing Date by or on behalf of the Corporation. Section 3.15. Compliance with Law and Other Instruments; Regulatory Matters. Except as set forth on Schedule 3.15 or Schedule 3.16, (a) the business of the Corporation has been and is being conducted in accordance with all applicable laws, ordinances, rules and regulations of all authorities (exclusive of Environmental Laws as defined in and covered by Section 3.17 below), violation of which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Corporation; and (b) the Corporation is not in violation of, or in default under, any term or provision of its charter documents or subject to any restriction of any kind or character which reasonably could be expected to have a Material Adverse Effect on the Corporation. Seller has received no notice of any proposed public improvement which may involve any charge being levied or assessed against the real property of the Corporation that reasonably could be expected to have a Material Adverse Effect on the Corporation. Section 3.16. Permits. Schedule 3.16 sets forth a list of all governmental approvals, authorizations, licenses and permits of all governmental agencies necessary to the conduct of the business of the Corporation on the date hereof. Except as set forth in Schedule 3.16, all such approvals, authorizations, licenses and permits are in full force and effect and, to the knowledge of Seller, no proceedings to revoke them are pending or threatened and the Corporation is in compliance with the terms and conditions under which they were issued or granted. Section 3.17. Environmental Matters. Except as set forth on Schedule 3.17, the property leased by the Corporation and described in Section 3.9 ("Property") and its existing and, to the knowledge of Seller, prior uses comply and have at all times complied with, and the Corporation is not in violation of and has not violated, in connection with the ownership, use, maintenance or operation of its business, any applicable federal, state, county or local statutes, laws, regulations, rules, ordinances, codes, licenses or permits relating to the handling, manufacturing, treatment, storage, disposal, discharge, use or transportation of hazardous or toxic substances, materials or wastes, including without limitation the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and the Toxic Substances Control Act (collectively, "Environmental Laws"). To Seller's knowledge, except as set forth on Schedule 3.17, the Corporation has received no notice that any Environmental Laws or other federal, state or local statutes, orders, rules or regulations, ordinances or governmental policies require any work, repairs, construction or capital expenditures with respect to the Property. Section 3.18. Insurance. Schedule 3.18 sets forth a list of the insurance coverage in effect as of the date of this Agreement. The Corporation is named as an insured with insurance carriers not related to or affiliated with Seller. Section 3.19. Banks; Powers of Attorney. Schedule 3.19 sets forth as of the date of this Agreement: (a) the names and locations of all banks, trust companies, savings and loan associations and other financial institutions at which the Corporation maintains safe deposit boxes or accounts of any nature to which it has access, and the names of all Persons authorized to draw thereon, make withdrawals therefrom or have access thereto; and (b) the names of all Persons to whom the Corporation has granted a power of attorney. Section 3.20. Brokerage Fees. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with this Agreement or the transactions contemplated hereby based upon any agreements, written or oral, made by or on behalf of Seller or by or on behalf of any director, officer, employee, agent or Affiliate of Seller. Section 3.21. Limitation of Representations and Warranties. Except as expressly set forth herein, neither Seller nor any of its Affiliates makes any representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. Section 3.22 Affiliates. Seller has no Affiliates. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to Seller as follows: Section 4.1. Organization and Good Standing. Buyer is a corporation duly organized, validly existing and in good standing under the laws of Maryland and has full corporate power and authority to carry on its businesses as they are now being conducted. Section 4.2. Investment Representation. Buyer is aware that the Shares are not registered under the Securities Act. Buyer possesses such knowledge and experience in business matters that it is capable of evaluating the merits and risks of its investments hereunder. Buyer is acquiring the Shares for its own account, for investment purposes only and not with a view to the distribution of thereof. Section 4.3 Capitalization. (a) The authorized capital stock of Buyer consists of: (a) 10,000,000 shares of common stock, par value $0.01 per share, no shares of which shall be outstanding immediately prior to Closing and 1,826,618 shares of which shall be outstanding as of the Closing Date, (b) 450,000 shares of Class A preferred stock, par value $0.01 per share, no shares of which shall be outstanding immediately prior to Closing and 221,800 shares of which shall be outstanding as of the Closing Date, and (c) 140 ,000 shares of Class B convertible referred stock, par value $0.01 per share, zero shares of which shall be outstanding as of the Clc sing Date. In addition, options have been authorized but no yet issued as of the Closing Date ft r the purchase of 69,017 shares of common stock of Buyer in five equal annual amounts at an exercise price to be determined as of the date of issuance. In addition, warrants have been issued and are outstanding as of the Closing Date representing the right to purchase up to 515,133 shares of common stock of Buyer, and warrants have been issued and are outstanding as of the Closing Date representing the right to purchase up to 927,241 shares of Class B convertible preferred stock and/or common stock of Buyer. Except for employment agreements with Martin Kandl and Mark Yanson, Buyer is not currently subject to any additional commitment or obligation that would require the issuance or sale of additional shares of capital stock at any time under options, subscriptions, warrants, rights or any other obligations. Neither the execution and delivery of this Agreement and the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby will (a) violate any of the provisions of the charter or by- laws of Buyer, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, permit or license or any statute, rule or regulation of any governmental body, or any agreement, indenture, mortgage or instrument to which Buyer is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Buyer. (b) Set forth on Schedule 4.3(b) is a list of the recordholders of the Buyer's capital stock as of the Closing Date, in each case identifying the number and type of shares owned in the Buyer, and a list of the option holders and warrant holders of the Buyer's capital stock, in each case identifying the number, vesting period-and exercise price of such options and warrants. (c) All of the shares of Buyer's capital stock reflected on Schedule 4.3(b) shall be issued in exchange for Property at Closing. Section 4.4. Execution and Effect of Agreement. Buyer has the corporate power and authority to enter into this Agreement and the Transaction Documents, and the execution and delivery of such agreements and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action of Buyer. This Agreement has been duly executed and delivered by Buyer and constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Each of the Transaction Documents, upon its execution and delivery by Buyer, will constitute a legal, valid and binding obligation of each such Person executing such Agreement, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity). Section 4.5 Affiliates. At the time of the Closing, the Buyer has no Affiliates, other than the Corporation, the directors of the Corporation, FF-ITP, L.P., and the Other Company. Section 4.6 Financial Statements. (a) The Buyer is newly formed, has no current operations and has no financial statements. Other than a note to Creditanstalt Corporate Finance, Inc. in the maximum amount of $10,000,000, and following the payment of any fees and expenses in connection with the Closing, the Buyer has no Material liabilities or obligations, whether contingent or absolute, direct or indirect, matured or unmatured, which if a balance sheet for the Buyer were prepared would have to be reflected therein or in the notes thereto, and the Buyer knows of no reasonable basis (as determined in the Buyer's reasonable judgment) for the assertion of any such liabilities or obligations. (b) The Buyer has provided the Seller with copies of the financial statements for the Other Company (dated as of February 28, 1997), together with a copy of the audit report prepared by Ernst & Young. (c) The Buyer has provided the Seller with a copy of the pro forma consolidated financial statements of the Buyer, consisting of the aggregate financial statements of the Corporation and the Other Company prepared by Ernst & Young, which reflect the contribution of the businesses of the Corporation and the Other Company effective at Closing, together with all debt and equity investments that are to be funded at Closing by Creditanstalt Bankverein and FF-ITP, L.P. (d) To the knowledge of the Buyer, the Balance Sheet of the Corporation fairly presents the Corporation's financial conditions as at the Financials Date and such Balance Sheet has been prepared in accordance with generally accepted accounting principles. Section 4.7. Restrictions. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) violate any of the provisions of the charter or by-laws of Buyer, or (b) conflict with or result in a breach of, or give rise to a right of termination of, or accelerate the performance required by the terms of any judgment, court order or consent decree, or any agreement, indenture, mortgage or instrument to which Buyer is a party or to which it or its property is subject, or constitute a default thereunder, except, in the case of the foregoing clause (b), where such conflict, breach, right of termination or default would not have a Material Adverse Effect on Buyer. Section 4.8. No Lawsuits: Consents. There is no lawsuit, proceeding or investigation pending or, to the knowledge of Buyer threatened, against Buyer the effect of which would prevent the consummation of any of the transactions contemplated hereby. Except (a) for filings, consents, waivers, approvals and authorizations as to which the failure to obtain or make would not have a Material Adverse Effect on the Buyer, no filing, consent, approval or authorization of any governmental authority or of any third party on the part of the Buyer is required in connection with the execution and delivery of this Agreement or any instrument contemplated hereby or the consummation of any of the transactions contemplated hereby. Section 4.9 Other Documents; Contracts. (a) A true and correct copy of Buyer's Articles of Incorporation and all amendments thereto as of the Closing Date is attached hereto as Exhibit G. A true and correct copy of Buyer's bylaws and all amendments thereto as of the Closing Date is attached hereto as Exhibit H. (b) Buyer has provided Seller with true and correct copies of all loan and other documents related to the loan from, and investment by, Creditanstalt to Buyer. (c) Buyer has provided Seller with true and correct copies of all investment documents related to the investment in Buyer by FF-ITP, L.P. (d) Buyer has provided Seller with true and correct copies of all employment agreements between Buyer and any executives or employees. (e) Buyer has provided Seller with true and correct copies of all agreements relating to any transactions through which the stockholders of ITP Acquisition Corp. will receive stock in Buyer. (f) Schedule 4.9 sets forth a list of the documents provided pursuant to Section 4.9(b), (c) and (d) and (e) above, together with any other contracts or agreements related to any other debt of Buyer or equity investments in Buyer. Section 4.10 Code 351 Transaction. Buyer represents and warrants that all shares of Buyer's capital stock and all options, warrants and other convertible securities or instruments with respect to Buyer's capital stock that are reflected on Schedule 4.3(b) hereto shall be issued or granted contemporaneous with the Closing. Section 4.11. Limitation of Representations and Warranties. Except as expressly set forth herein, Buyer makes no representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement. ARTICLE V COVENANTS AND AGREEMENTS OF THE SELLER Seller covenants and agrees for the benefit of Buyer as follows: Section 5.1. Corporate Action. Seller shall reasonably cooperate with Buyer, and shall cause the Corporation to reasonably cooperate with Buyer, with respect to all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Seller shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 5.2. [intentionally deleted] Section 5.3. Consents. (a) Seller shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, it being understood that neither Seller nor any of its Affiliates shall be under any obligation to pay money to any third party (other than fees imposed by statute or regulation to obtain governmental consents or approvals) as a condition to receiving any such consents, waivers or authorizations and (ii) cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. Section 5.4. Access to Information and Cooperation. Subsequent to the date of this Agreement, Seller shall give Buyer, its counsel, and its consultants full and complete access, upon reasonable notice during normal business hours, to all records and affairs of the Corporation within their possession and will provide copies of such information concerning the Corporation, and the Other Companies as Buyer may reasonably request for any proper purpose, including without limitation in connection with the preparation of any tax returns or financial statements or in connection with any judicial, quasi judicial, administrative, tax audit or arbitration proceeding. Section 5.5. Public Statements. Seller shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in public dissemination thereof without the prior written consent of Buyer (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Seller, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Seller has received such counsel's opinion, (i) Seller shall advise Buyer of the opinion and (ii) at Buyer's request, Seller shall provide a copy to Buyer, and further provided that Seller shall be permitted to disclose to Employees, and upon Buyer's request to give Buyer the opportunity to make a joint statement with Seller to Employees, concerning the terms of Benefit Arrangements and Employee Benefit Plans available to Employees following Closing. ARTICLE VI COVENANTS AND AGREEMENTS OF BUYER Buyer covenants and agrees for the benefit of Seller as follows: Section 6.1. Corporate Action. Buyer shall take all action, corporate or otherwise, necessary or appropriate for the consummation of the transactions contemplated hereby. Buyer shall execute such additional documents, instruments, memoranda and other writings as shall be necessary or appropriate to carry out and effectuate the terms and conditions of this Agreement. Section 6.2. Public Statements. Buyer shall not release any information concerning this Agreement or the transactions contemplated hereby that is intended for or may result in: public dissemination thereof without the prior written consent of Seller (which shall not be unreasonably withheld or delayed), unless (a) in the opinion of counsel to Buyer, the release of such information is required by law and (b) prior to the release of such information and as soon as possible after Buyer has received such counsel's opinion, (i) Buyer shall advise Seller of the: opinion and (ii) at Seller's request, Buyer shall provide a copy to Seller. Section 6.3. Consents. Buyer shall use reasonable efforts to (i) obtain all consents, waivers and authorizations and make all filings with and give all notices that may be necessary or reasonably required to consummate the transactions contemplated hereby, provided that Buyer shall not be under any obligation to pay money to any third party as a condition to receiving any such consents, waivers or authorizations, and (ii) cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Section 6.4. Certain Employee Benefit Matters. (a) Commencing upon the Closing Date, Buyer shall cause the Corporation to continue to employ each Employee who is an employee on the Closing Date upon the same terms and conditions of employment as pertained to each Employee on the day immediately preceding the Closing Date and as are specifically described in the Schedules to this Agreement, provided that this undertaking shall in no way diminish the Corporation's existing rights to lay off employees or to terminate employees on account of unacceptable performance or otherwise in accordance with the terms of any contracts of employment. If any Employee is laid off or on leave on the Closing Date, Buyer shall cause the Corporation to recall or reinstate such Employee in accordance with the layoff or leave of absence policy of the Corporation that is in effect on the date of this Agreement and is specifically described in the Schedules. Buyer shall take all reasonable action required or appropriate to cause the Corporation to fulfill all obligations of the employer under all Benefit Arrangements, Employee Benefit Plans, Multiemployer Plans, and Retirement Plans as of the Closing Date (including without limitation severance payments or benefits that have accrued, or that accrue or inure, on or after the Closing Date or that inure after the date of this Agreement and prior to the Closing Date as a result of action taken by Seller with consent of Buyer) which are specifically described on the Schedules, except as may be required otherwise by law. (b) On or prior to the Closing, the Buyer shall adopt the ITP 1997 Long Term Incentive Plan (the "Incentive Plan"), a copy of which is attached as Exhibit C hereto. The Buyer has reserved a total of 37,919 shares of common stock for issuance to the Corporation's Employees pursuant to the exercise of options that are to be granted pursuant to the Incentive Plan. On or prior to Closing, the Seller will provide Buyer with the names of the recipients of such option grants. Such option grants shall be approved effective as of the Closing with an option agreement, and related documentation to be provided to the recipients within five days subsequent to the Closing. Section 6.5. Preservation of and Access to Certain Information and Cooperation After Closing. (a) Buyer shall, and from and afer the Closing Date shall cause the Corporation and its Affiliates, to preserve all books and records of the Corporation until Seller notifies Buyer that all statutes of limitations relating to tax periods to which such records relate have expired, and thereafter not to destroy or dispose of such records without notice to Seller offering it the right to copy such records. Except as prohibited or limited by law or regulation, Buyer shall, and shall cause the Corporation from and after the Closing Date to, give Seller and Seller's employees, accountants, counsel, and advisors, reasonable access upon reasonable notice and for proper business purposes during normal business hours, to all officers, employees, offices, properties, agreements, books, records and affairs of the Corporation, in a manner that does not unreasonably interfere with the normal conduct of its business. Buyer shall, and shall cause the Corporation to, prepare and transmit such financial reports in accordance with past practices and procedures and on a timely basis as may be necessary for Seller or its Affiliates to prepare any Consolidated Tax Return, and ensure that Seller and its authorized representatives shall be free, during the period referred to in the first sentence of this Section, to make copies of such books, records, files and data concerning the Corporation for the following purposes: (i) the review of the Proposed Closing Balance Sheet and the resolution of any disputes with respect to the Proposed Closing Balance Sheet, (ii) the preparation of any tax returns for the Affiliated Group, and (iii) or in anticipation of any judicial, quasi judicial, administrative, tax audit, or arbitration proceeding initiated by or against third parties and relating to the Corporation. Except as may be required by law or in the bona fide prosecution of its rights under this Agreement or any Transaction Document and except as specifically provided above, Seller shall not use or disclose any such information. Section 6.6. Nondisposition of Shares. Buyer shall not, and shall not permit any of their Affiliates to, sell, transfer, offer for sale, pledge, hypothecate, or otherwise dispose of the Shares except pursuant to a valid registration under the Securities Act, unless an exemption from registration under the Securities Act is available. Section 6.7 Put Option. (a) In the event that Creditanstalt Corporate Finance, Inc. or FF-ITP, L.P. exercises its right under Article IV of the Stockholder Agreement executed contemporaneously herewith to sell to Buyer all or any portion of its shares, such shares as are requested to be sold being defined as the "Put Shares" in such Stockholder Agreement, Seller shall have the right to give notice to Buyer that it is electing to sell all or any portion of its common stock in Buyer (the "Seller Put Shares"). In the event that Seller gives such notice to Buyer, the price to be paid by Buyer for the Seller Put Shares will be determined in accordance with Section 4.02 of such Stockholder Agreement. Under no circumstances shall Buyer be obligated to repurchase the Seller Put Shares until Buyer has repurchased all of the Put Shares requested to be bought by Creditanstalt Corporate Finance, Inc. and/or FF-ITP, L.P., pursuant to Article IV of such Stockholder Agreement. At such time as Buyer has repurchased all of the Put Shares pursuant to Article IV of such Stockholder Agreement, Seller may notify Buyer of the closing for the sale of the Seller Put Shares to Buyer, which will not be less than fifteen (15) nor more than ninety (90) days after the date of such notice. In the event that Buyer thereafter defaults in its obligation to purchase all or any portion of the Seller Put Shares, in addition to any other rights or remedies of Seller, Seller shall have the remedies provided for in Section 4.04 of the Stockholder Agreement. (b) No Series A preferred stock shall be repurchased or redeemed by the Buyer at any time that the Promissory Note provided for in Section 2.2 hereof is outstanding. In conjunction with the exercise by either Creditanstalt or FF-ITP, L.P. of the redemption right pursuant to Section B.5. of Article IV of the Certificate of Incorporation, Buyer will repay any amounts outstanding on the Promissory Note such that Seller and the holders of the Series A preferred stock whose shares are to be repurchased or redeemed receives funds in proportion to the amounts outstanding under the Promissory Note and the Series A Preferential Amount associated with the Series A preferred stock. ARTICLE VII CONDITIONS OF OBLIGATIONS OF BUYER The obligations of Buyer to consummate the purchase of the Shares on the Closing Date and to perform its other covenants and agreements in accordance with the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Buyer, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to, Buyer as the result of the failure to satisfy such condition: Section 7.1. Representations and Warranties True. Except as otherwise permitted, contemplated, or limited by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Seller contained in ARTICLE III that is limited by Materiality shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date, and (b) each of the representations and warranties that is not so limited shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date. Section 7.2. Covenants and Agreements--No Default. Seller shall not be in default in respect of any obligation under this Agreement and Seller shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by them prior to or as of the Closing Date. Section 7.3. [intentionally deleted] Section 7.4. No Material Adverse Change. Except as permitted or contemplated by this Agreement or any Schedule, or disclosed in the Balance Sheet, since the Financials Date the Corporation shall not have suffered an adverse change in its business or financial condition that could reasonably be expected to have a Material Adverse Effect on the Corporation. Section 7.5. Consents. Seller shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement other than those that are not Material or set forth in Schedule 3.5, it being understood that (a) the Seller shall not be under any obligation to pay money to any third party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations, and (b) Seller shall use reasonable efforts to cause each of the conditions precedent to the obligations of Buyer hereunder to be satisfied. In the event Seller is unable to obtain any such consents, the condition contained in this Section 7.5 shall be deemed satisfied if Seller provides to Buyer and, other than as to matters identified on Schedule 3.11, in a manner and form satisfactory to Buyer in its sole discretion, at the Closing the economic equivalent of any rights that would have inured to the Buyer had such consents been obtained. Section 7.6. Transaction Documents. Seller shall have provided Buyer with all of the documents required by Section 10.2 to be delivered at Closing by Seller. Section 7.7. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or any Material Transaction Document or against or involving the Corporation where the outcome might reasonably be expected to have a Material Adverse Effect on the Corporation. ARTICLE VIII CONDITIONS OF OBLIGATIONS OF SELLER The obligation of Seller to consummate the sale of the Shares on the Closing Date and to perform their other covenants and agreements in accordance with the terms and conditions of this Agreement are subject to each of the following conditions which, if not satisfied, may be waived in writing by Seller, provided however, that any such waiver, if made knowingly, shall also be deemed a waiver of any claim for damages, losses or other remedies otherwise available to Seller or its Affiliates as the result of the failure to satisfy such condition: Section 8.1. Representations and Warranties True. Except as otherwise permitted or contemplated by this Agreement and except for representations and warranties that by their terms speak only as of a specified date, (a) each of the representations and warranties of Buyer contained in ARTICLE IV that is limited by Materiality shall be true and correct in all Material respects on and as of the Closing Date as though made on and as of the Closing Date and (b) each of the representations and warranties that is not so limited shall be true and correct on and as of the Closing Date as though made on and as of the Closing Date. Section 8.2. Covenants and Agreements--No Default. Buyer shall not be in default in respect of any obligation under this Agreement and Buyer shall have performed or complied in all Material respects with all covenants and agreements required by this Agreement to be performed or complied with by Buyer prior to or as of the Closing Date. Section 8.3. Officer's Certificates. Buyer shall have furnished Seller with a certificate signed by a corporate officer confirming the satisfaction of the conditions set forth in Sections 8.1 and 8.2. Section 8.4. Consents. Buyer shall have obtained all third-party and governmental consents, waivers, authorizations and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 4.6, it being understood that (a) Buyer shall not be under any obligation to pay money to any third-party (other than fees imposed by statute or regulation) as a condition to receiving such consents, waivers, and authorizations and (b) Buyer shall use reasonable efforts to cause each of the conditions precedent to the obligations of Seller hereunder to be satisfied. Seller shall have obtained all third-party and governmental consents, waivers, authorizations, and approvals and shall have made all filings and given all notices required in connection with the consummation of the transactions contemplated by this Agreement that are referenced in Section 3.5 or are set forth in Schedule 3.5. Section 8.5. Other Transactions. Contemporaneous with the Closing contemplated herein, Buyer shall close the acquisition of the Other Company and the transactions contemplated in the documents provided to Seller pursuant to Section 4.9(b) and Section 4.9(c) hereof and Section 4.10 hereof. Section 8.6. Transaction Documents. Buyer shall have provided Seller with all of the documents required by Section 10.3 to be delivered at Closing by Buyer. Section 8.7. Adverse Proceedings. No Material action, proceeding or governmental investigation shall have been instituted or threatened against the consummation of the transactions contemplated in this Agreement or the Transaction Documents. Section 8.8 Board/Executive Committee. Buyer shall have caused the Board and Executive Committee to be formed, in accordance with a certain Stockholder Agreement of even date herewith between Buyer, Seller and various other parties. Buyer shall promptly arrange for a meeting of the stockholders of Buyer, at which elections can be held for members on the Board. ARTICLE IX REGISTRATION RIGHTS [intentionally deleted] ARTICLE X CLOSING Section 10.1. Closing. The Closing shall take place at the offices of Semmes, Bowen & Semmes, 250 West Pratt Street, Baltimore, Maryland 21201, on May 29, 1997 at 10:00 a.m., or at such other place and at such other time and date as may be mutually agreed upon in writing by Buyer and Seller, only upon fulfillment of (a) all the conditions set forth in ARTICLE VII that have not been waived by Buyer, and (b) all the conditions set forth in ARTICLE VIII that have not been waived by Seller. All proceedings to be taken and all documents to be executed and delivered by Seller in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Buyer and its counsel. All proceedings to be taken and all documents to be executed and delivered by Buyer in connection with the consummation of the transactions contemplated hereby shall be reasonably satisfactory in form and substance to Seller and its counsel. All proceedings to be taken and all documents to be executed and delivered at the Closing shall be deemed to have been taken and executed simultaneously, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed or delivered. Section 10.2. Documents to be Delivered by Seller. Deliver, or shall cause to be delivered, to Buyer the following: (a) Certificates representing the Shares, which certificates shall be duly endorsed in blank or, in lieu thereof, shall have affixed thereto stock powers executed in blank and in proper form for transfer; (b) An opinion of Shaw, Pittman, Potts & Trowbridge, counsel for the Seller, dated the Closing Date, substantially in the form attached hereto as Exhibit D; (c) A good standing certificate and a copy of the Corporation's charter, certified as of a date reasonably close to the Closing Date; (d) The certificates contemplated by Section 7.3; and (e) A Subordination Agreement to Creditanstalt-Bankverein subordinating Seller's rights under the Promissory Note provided for in Section 2.2 hereof to certain rights of Creditanstalt-Bankverein. (f) Such other documents, instruments or agreements as may be reasonably requested by Buyer to effectuate the transactions contemplated by this Agreement. Section 10.3. Documents to be Delivered by Buyer. At the closing, Buyer shall deliver, or cause to be delivered, to Seller the following: (a) A wire transfer of funds to the account designated by Seller in an amount equal to the total Purchase Price, as provided in Section 2.2; (b) The fully executed Promissory Note provided for in Section 2.2 (c) Certificates representing 265,435 shares of the common stock of the (d) An opinion of Semmes Bowen & Semmes, counsel for Buyer, dated the Closing Date, substantially in the form attached hereto as Exhibit E; (e) The Executive Employment Agreement of Martin Kandl in the form agreed to by the parties; (f) The Stock Repurchase Agreement in favor of the Seller reflecting the issuance of 100,000 shares of Buyer's common stock; (g) Certificates of the Secretary or an Assistant Secretary of Buyer, dated the Closing Date, setting forth copies of the resolutions of the Board of Directors of Buyer, authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, including all option grants contemplated by Section 6.4(b) hereof, and certifying that such resolutions have not been amended or rescinded and are in full force and effect; (h) The certificates contemplated by Section 8.3; and (i) Such other documents, instruments or agreements as may be reasonably requested by Seller to effectuate the transactions contemplated by this Agreement. ARTICLE XI MISCELLANEOUS Section 11.1. Survival of Representations Warranties. Covenants and Agreements. Except as otherwise expressly provided in this Agreement, all covenants and all representations and warranties made by the parties in this Agreement (including statements contained in any Schedule or certificate or other instrument delivered by or on behalf of a party to this Agreement) shall survive the execution of this Agreement and the Closing and any investigations, examinations or audits made by or on behalf of the parties, provided that representations and warranties shall survive only until the applicable "Expiration Date" as follows: (a) The Expiration Date for the representations and warranties made in Section 3.14 shall be the date on which all applicable tax statutes of limitation have expired; and (b) The Expiration Date for all other representations and warranties made in this Agreement shall be the six-month anniversary of the Closing Date. On the applicable Expiration Date, the associated representations and warranties shall have no further force or effect and all liabilities of the parties thereunder shall be extinguished, provided that if prior to the Expiration Date a party has delivered to the other party a notice asserting a good faith claim for breach of representation and warranty, that specific claim shall survive and be actionable after the Expiration Date. Section 11.2. Indemnification. Subject to Section 11.2(f) hereof, Seller shall hold harmless and indemnify Buyer from and against all claims, actions, damages, liabilities or losses (including court costs and attorneys fees) (collectively, "Losses") arising out of the breach by Seller of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement, but only where such claims are asserted within six months after the Closing Date. In no event shall Seller be liable to Buyer under this Section 11.2(a) in an aggregate amount greater than 50% of the Purchase Price. Provided that Buyer shall be able to pay for any Losses without causing a breach of any financial covenants contained in a certain Loan and Security Agreement executed contemporaneously herewith between Buyer, the lenders named therein (the "lenders") Creditanstalt-Bankverein as the Issuing Bank and Creditanstalt Corporate Finance, Inc. as agent for the lenders (the "Loan Agreement") or without violating provisions of such Loan Agreement relating to borrowing availability, half of any liability of Seller to Buyer under this Section 11.2(a) shall be paid through a reduction of the principal amount of the Promissory Note provided for in Section 2.2 hereof, and the other half of such liability shall be paid, at Seller's discretion, through a further reduction in the principal amount of such Promissory Note or in the form of shares of stock in Buyer, each such share being valued at the price per share established at the Closing Date and set forth on Schedule 11.2. In the event that Buyer cannot pay for all or a portion of the Losses without causing a breach of any financial covenants contained in the Loan Agreement or without violating provisions of such Loan Agreement relating to borrowing availability, any liability of Seller to Buyer under this Section 11.2(a) shall be paid as follows: 50% shall be paid for through a repayment to Buyer by Seller of cash (up to a maximum cash repayment of $500,000), and the balance shall be paid through a reduction of the principal amount of the Promissory Note. In this event, at such time as Buyer is able to act without causing a breach of any financial covenants contained in the Loan Agreement or without violating provisions of such Loan Agreement relating to borrowing availability, Buyer shall promptly refund to Seller the cash paid by Seller pursuant to this Section 11.2(a) and, at Seller's election, the amount of such refund shall either be offset against the principal amount of the Promissory Note, or Seller shall return to Buyer for cancellation shares of stock in Buyer, each such share being valued at the price per share established at the Closing Date and set forth on Schedule 11.2. (b) Subject to Section 11.2(f) hereof, Buyer shall hold harmless and indemnify Seller from and against all Losses arising out of: (i) the breach by Buyer of any of its representations, warranties, covenants or agreements made under or pursuant to this Agreement; (ii) the breach by Buyer or, after Closing, the Corporation of any agreements with any third parties; (iii) actions wrongfully taken with respect to the Corporation by Buyer or its Affiliates, or by the Corporation after Closing; and (iv) actions taken with respect to the Corporation by Seller prior to Closing at the request of Buyer. (c) For purposes of this Section 11.2, any Losses incurred by the Corporation shall be deemed to have been incurred by Buyer. (d) After the Closing, Seller shall not be entitled to contribution from, or recovery against, the Corporation with respect to any liability of Seller which may arise under this Section 11.2. (e) Consummation of the transactions contemplated by this Agreement and the Transaction Documents shall not be deemed to be a waiver of any right or remedy of a party, nor shall this Section 11.2 or any other provision of this Agreement be deemed to be a waiver of any ground of defense by a party. (f) No claims for any Losses hereunder shall be made unless and until such Losses exceed $50,000 in the aggregate, and then the indemnifying party shall only be liable for the amount of the Losses exceeding $50,000. The foregoing shall not apply to adjustment of the Purchase Price pursuant to Section 2.3 hereof. (g) Any claims arising from or in connection with this Agreement are governed solely by this ARTICLE XI. Section 11.3. Disclaimer of Other Representations and Warranties by Seller. The parties hereto acknowledge and agree that Seller does not make, and has not made, any representations or warranties relating to Seller, the Corporation, or any of Seller's Affiliates or any of the transactions contemplated by this Agreement other than the representations and warranties expressly set forth in this Agreement. Without limiting the generality of the disclaimer set forth in the preceding sentence, Seller does not make, has not made and shall not be deemed to have made any representations or warranties in the Offering Memorandum, in any presentation relating to the businesses of the Corporation given in connection with the transactions contemplated by this Agreement, in any filing made by or on behalf of the Corporation or its Affiliates with any governmental agency, or in any other information provided to or made available to Buyer and not included in the Schedules to this Agreement, and no statement contained in the Offering Memorandum or made or contained in any such presentation, filing, or information shall be deemed a representation or warranty hereunder or otherwise. No person has been authorized by Seller, its Affiliates or the Corporation to make any representation or warranty in respect of Seller, its Affiliates or the Corporation in connection with the transactions contemplated by this Agreement. Section 11.4. Disclosure. Notwithstanding any provision to the contrary contained in this Agreement, the Exhibits or the Schedules, any information disclosed in one Schedule shall be deemed to be disclosed in all Schedules. Certain information set forth in the Schedules has been included and disclosed solely for informational purposes and may not be required to be disclosed pursuant to the terms and conditions of the Agreement. The disclosure of any information shall not be deemed to constitute an acknowledgment or agreement that the information is required to be disclosed in connection with the representations and warranties made in this Agreement or that the information is Material, nor shall any information so included and disclosed be deemed to establish a standard of materiality or otherwise used to determine whether any other information is Material. Section 11.5. Expenses and Taxes. All legal, accounting and other costs and fees incurred by the Corporation or the Seller in connection with the transactions contemplated by this Agreement shall be borne and paid for by the Corporation. All legal, accounting and other costs and fees incurred by Buyer in connection with the transactions contemplated by this Agreement and all taxes (other than value added taxes or taxes on, relating to or measured by income or gains), stamp duty, notarial, registration and recording fees and similar taxes resulting from or relating to the transfer of any of the Shares to Buyer or any party designated by Buyer shall be borne by Buyer. Section 11.6. Special Indemnification for Tax Liabilities (a) In the event of a claim referred to in clause (c) of this Section 11.6, the Corporation and Buyer hereby agree to and shall lend Seller a sum (the "Tax Loan") equal to all "Tax Liabilities" (as that term is hereinafter defined), which Tax Loan shall not bear interest and shall be due and payable upon the sale by Seller of Buyer's capital stock received in exchange for the Shares, excluding any sales pursuant to the Stock Repurchase Agreement, to the extent and as provided in clause (i) of this Section 11.6; Corporation and Buyer shall indemnify and hold harmless Seller, on an after-tax basis, from and against the payment of any and all interest and penalties on the Tax Liabilities, any income taxes attributable to imputed income to Seller on the Tax Loan, and any and all costs and expenses which may reasonably be incurred in connection with contesting any claims for Tax Liabilities, including, without limitation, reasonable fees and disbursements of counsel, accountants and other experts (such interest and penalties, income taxes, costs and expenses shall be referred to collectively as the "Costs and Expenses"). (b) For purposes of this Agreement, the term "Tax Liabilities" shall mean and include any and all liabilities for taxes which are or shall be incurred by Seller if the receipt by Seller of Buyer capital stock in connection with the transactions contemplated herein fails to qualify for tax deferral under Section 351 of the Code. (c) In the event that Seller receives written notice of a claim made (or an audit commenced) with respect to the sale of the Shares by any federal, state, local or other governmental authority from such governmental authority and that such claim (or any claim that may be made in connection with any such audit), if successful, would result in an obligation to pay any Tax Liabilities (hereafter referred to collectively as a "claim"), Seller shall give notice to the Corporation and the Buyer of such claim in writing, and shall not make payment of the taxes claimed for at least thirty (30) days after the giving of such notice (unless required by law to make payment prior to such time). If the Buyer wishes to contest such claim on behalf of Seller, the Buyer shall within thirty (30) days after notice of such claim, notify Seller in writing of its desire to contest such claim on behalf of Seller. If the Buyer desires to contest such claim, it. shall promptly furnish an opinion of independent tax counsel selected by the Buyer and reasonably satisfactory to Seller that there is a reasonable defense to the claim, which opinion shall be a reasoned opinion reasonably satisfactory to Seller. In connection with contesting any claim, the Buyer shall pay all Costs and Expenses in connection with such contest and shall be obligated promptly to pay Seller all Costs and Expenses incurred in connection with contesting such claim. Notwithstanding the decision to contest or not to contest such claim, the Buyer shall remain liable for all Costs and Expenses, and shall be required to extend the Tax Loan. (d) Regardless of whether the Buyer desires to contest such claim, the Buyer shall promptly extend the Tax Loan upon Seller's request and in any event at least ten (10) days prior to the date that Seller notifies the Corporation and the Buyer that it will be making such payment to the appropriate governmental authority. In addition, the Buyer shall advance or reimburse Seller upon demand from time to time for all Costs and Expenses. (e) The Seller's failure to give timely notice or to provide copies of documents or to furnish relevant data in connection with any such claim shall not constitute a defense (in whole or in part) to such claim for indemnification for Seller, unless and only to the extent that such failure shall result in any material prejudice to the Buyer. (f) If any such claim referred to in subsection 11.6(c) hereof shall be made by any federal, state, local or other governmental authority and the Buyer shall have failed (i) to notify Seller in writing of its desire to contest or not to contest such claim, as above provided, or (ii) to comply with any of the other material terms of this Section 11.6, the Buyer shall become obligated promptly to extend the Tax Loan and to pay Seller from time to time upon demand, on an after-tax basis, the Costs and Expenses which Seller may incur in connection with contesting such claim (whether or not Seller elects to contest such claim). (g) While there is a claim for indemnification or a request for the funding of the Tax Loan hereunder that remains outstanding, no amounts in cash or property (except for in-kind dividends on the Series A Preferred Stock) shall be paid by the Buyer with respect to any of the Buyer's preferred stock or common stock, as dividends, distributions or otherwise. (h) In the event that the Buyer extends the Tax Loan and, prior to Seller's repayment thereof, Seller receives a refund of taxes paid by Seller as a result of the recognition by applicable taxing authorities of Seller's exchange of the Shares as a tax- deferred rather than a taxable transaction, then Seller shall promptly pay such amounts to the Corporation but only to the extent required to repay outstanding amounts on the Tax Loan. (i) In the event that the Buyer extends the Tax Loan and the Tax Loan remains outstanding, and in the event of Seller's sale of all or any portion of the shares of Buyer's capital stock received by Seller in the exchange for the Shares (the "Buyer Stock"), the Seller shall promptly repay to the Corporation or the Buyer, as the case may be, an amount equal] to the aggregate amount of any and all liabilities for income taxes which would have been incurred at that time by Seller with respect to the portion of the Buyer Stock sold at the then applicable tax rates if the transactions herein had qualified for tax deferral under Section 351 of the Code, up to the amount of the Tax Loan then outstanding. In the event the Seller has sold at any time or from time to time some but not all of its Buyer Stock, any remaining outstanding amount of the Tax Loan (after the repayment or repayments provided for in the first sentence of this clause (i) have been made) shall be extended until any subsequent sale of additional Buyer Stock by the Seller, at which time, the Seller shall again be required to repay outstanding principal on the Tax Loan pursuant to the calculation set forth in the preceding sentence. In the event that Seller has sold all of its Buyer Stock, any remaining outstanding amount of the Tax Loan (after the repayment or repayments provided for in the first sentence of this clause (i) have been made) shall be forgiven by the Corporation or the Buyer, as the case may be. For purposes of this clause (i), Seller shall notify the Corporation and Buyer in writing of Seller's estimate of the aggregate amount of any and all liabilities for income taxes which would have been incurred at that time by Seller at the then-applicable rates if the transactions herein had qualified for tax deferral under Section 351 of the Code, and such calculation shall be binding on the Corporation and the Buyer unless objected to within thirty (30) days after receipt of Seller's estimate. Section 11.7. Entire Agreement. This Agreement, the Schedules, and the Exhibits constitute the entire agreement and understanding between the parties hereto in respect of the : matters set forth herein, and all prior negotiations, writings and understandings relating to the subject matter of this Agreement (including without limitation the Offering Memorandum), other a than the Confidentiality Agreement, are merged herein and are superseded and canceled by this Agreement. Other than as expressly set forth in this Agreement and the Schedules and Exhibits, no representations, warranties, covenants, agreements or conditions, express or implied, whether by statute or other wise, have been made by the parties hereto. Section 11.8. Amendment and Waiver. This Agreement may be amended, modified, supplemented or changed in whole or in part only by an agreement in writing making specific reference to this Agreement and executed by each of the parties hereto. Any of the terms and conditions of this Agreement may be waived in whole or in part, but only by an agreement in writing making specific reference to this Agreement and executed by the party that is entitled to the benefit thereof. Section 11.9. Binding Agreement and Successors. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that prior to the consummation of this Agreement the rights of the parties hereunder may not be assigned, and provided that the obligations of the parties hereunder may not be delegated, in whole or in part, without the prior written consent of the other party hereto. Section 11.10. No Third Party Beneficiaries. Nothing in this Agreement is intended to confer upon any Person other than the parties hereto any rights or remedies. Section 11.11. Notices. Any notice, request, instruction or other document or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to be given upon (i) delivery in person, (ii) five days after being deposited in the mail, postage prepaid, for mailing by certified or registered mail, (iii) one day after being deposited with an overnight courier, charges prepaid, or (iv) when transmitted by facsimile, with a copy simultaneously sent as provided in clauses (ii) and (iii), in every case as follows: If to Buyer, delivered or mailed to: IT PARTNERS Inc. 1006 Highland Drive Silver Spring, Maryland 20910 Attention: Daniel J. Klein with a copy delivered or mailed by the same method to: Kevin M. O'Connell, Esquire Semmes, Bowen & Semmes 250 West Pratt Street Baltimore, Maryland 21201 If to Seller, delivered or mailed to: Martin Kandl 10700 Harper Avenue Silver Spring, Maryland 20901 Attention: Kandl with a copy delivered or mailed by the same method to: Craig E. Chason, Esq. Shaw, Pittman, Potts & Trowbridge 1501 Farm Credit Drive McLean, Virginia 22102 or to such other address or addresses as may be specified in writing at any time or from time to time by either party to the other party hereto. Section 11.12. Further Assurances. The parties hereto each agree to execute, make, acknowledge, and deliver such instruments, agreements and other documents as may be reasonably required to effectuate the purposes of this Agreement and to consummate the transactions contemplated hereby. Section 11.13. Article and Section Headings. The Article, Exhibit and Section headings contained in this Agreement, the Exhibits and the Schedules are for convenience of reference only and shall not limit or otherwise affect the meaning or interpretation of this Agreement, the Exhibits, or the Schedules or any of their terms and conditions. Section 11.14. Governing Law. This Agreement shall be construed and enforced in accordance with and shall be governed by the laws of the State of Maryland, without regard to its conflict of law provisions and principles. Section 11. 15. Courts. Any dispute arising from the interpretation or operation of this Agreement shall be resolved in the courts of the State of Maryland, and the parties hereby consent to and elect, and waive any objection to, such jurisdiction in the event of litigation hereunder. Section 11.16. Construction. As used in this Agreement, any reference to the masculine, feminine or neuter gender shall include all genders, the plural shall include the singular, and the singular shall include the plural. With regard to each and every term and condition of this Agreement and any and all agreements and instruments subject to the terms hereof, the parties hereto understand and agree that the same have or has been mutually negotiated, prepared and drafted, and that if at any time the parties hereto desire or are required to interpret or construe any such term or condition or any agreement or instrument subject hereto, no consideration shall be given to the issue of which party hereto actually prepared, drafted or requested any term or condition of this Agreement or any agreement or instrument subject hereto. Section 11. 17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Corporation, Seller and Buyer have executed this Agreement as of the day and year first above written. KANDL DATA PRODUCTS, INC. By: -------------------------------- Martin Kandl, President -------------------------------- Martin Kandl, Individually -------------------------------- Haeyoung P. Kandl, Individually IT PARTNERS INC. By: -------------------------------- Daniel J. Klein EX-10.8 17 --------------------------------------------------------------------------- AGREEMENT AND PLAN OF ORGANIZATION dated as of January 8, 1998 by and among IT PARTNERS, INC., ITP NO. 10, INC., (a wholly-owned subsidiary of IT Partners, Inc.) SEQUOIA DIVERSIFIED PRODUCTS, INC., and the STOCKHOLDERS named herein TABLE OF CONTENTS 1. THE MERGER 5 1.1 Delivery and Filing of Articles of Merger 5 1.2 Effective Time of the Merger 6 1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation 6 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, ITP and NEWCO 7 2. CONVERSION OF STOCK 7 2.1 Manner of Conversion 7 2.2 Rights -- ITP 8 3. DELIVERY OF MERGER CONSIDERATION 8 3.1 Delivery of Merger Consideration 8 3.2 Closing Date Adjustments to Merger Consideration 8 3.3 Post-Closing Adjustments to Merger Consideration 9 4. CLOSING 11 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS 12 5.1 Due Organization 12 5.2 Authorization 12 5.3 Capital Stock of the COMPANY 13 5.4 Subsidiaries 13 5.5 Financial Statements 13 5.6 Liabilities and Obligations 14 5.7 Accounts and Notes Receivable 14 5.8 Intellectual Property; Permits and Intangibles 14 5.9 Environmental Matters 15 5.10 Personal Property 17 5.11 Significant Customers; Material Contracts and Commitments 18 5.12 Real Property 19 5.13 Insurance 20 5.14 Compensation; Employment Agreements; Organized Labor Matters 20 5.15 Employee Plans 20 5.16 Compliance with ERISA 20 5.17 Conformity with Law; Litigation 21 5.18 Taxes 22 5.19 No Violations 25 5.20 Business Conduct 25 5.21 Misrepresentation 26 5.22 Authority; Ownership 27 5.23 No Intention to Dispose of ITP Stock 27 6. REPRESENTATIONS OF ITP and NEWCO 27 6.1 Due Organization 27 6.2 Authorization 28 6.3 Transaction Not a Breach 28 6.4 Misrepresentation 28 6.5 Capital Stock 28 6.6 Subsidiaries 29 6.7 Conformity with Law; Litigation 29 6.8 Financial Statements 30 6.9 No Undisclosed Liabilities 30 6.10 HSR Act 30 6.11 No Material Adverse Change 30 7. COVENANTS PRIOR TO CLOSING 31 7.1 Access and Cooperation: Due Diligence 31 7.2 Conduct of Business Pending Closing 31 7.3 Prohibited Activities 32 7.4 No Shop 33 7.5 Agreements 33 7.6 Notification of Certain Matters 34 7.7 Amendment of Schedules 34 7.8 Further Assurances 35 7.9 Approval of Merger Agreement 35 7.10 Conduct of Business by ITP Pending the Merger 35 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NAMED STOCKHOLDERS AND THE COMPANY 36 8.1 Representations and Warranties 36 8.2 Performance of Obligations 36 8.3 No Litigation 36 8.4 Opinion of Counsel 36 8.5 Consents and Approvals 37 8.6 Good Standing Certificates 37 8.7 Secretary's Certificate 37 8.8 No Material Adverse Change 37 8.9 Employment Agreements 37 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO 37 9.1 Representations and Warranties 37 9.2 Performance of Obligations 38 9.3 No Litigation 38 9.4 Secretary's Certificate 38 9.5 No Material Adverse Change 38 9.6 STOCKHOLDERS' Release 38 9.7 Termination of Related Party Agreements 39 9.8 Opinion of Counsel 39 9.9 Consents and Approvals 39 9.10 Good Standing Certificates 39 9.11 Employment Agreements 39 9.12 Stockholders' Agreement 39 9.13 Subordination Agreement 39 9.14 Financing 39 9.15 Letter Agreement 40 9.16 Employment Matters 40 10. COVENANTS AFTER CLOSING 40 10.1 Preparation and Filing of Tax Returns 40 10.2 Stock Options 41 10.3 Annual Incentive Compensation Plan 41 11. INDEMNIFICATION 41 11.1 General Indemnification by the STOCKHOLDERS 41 11.2 Indemnification by ITP 42 11.3 Third Person Claims 42 11.4 Exclusive Remedy 43 11.5 Limitations on Indemnification 43 11.6 Subrogation 44 11.7 Tax and Insurance 44 11.8 Undertakings 44 12. TERMINATION OF AGREEMENT 44 12.1 Termination 44 12.2 Liabilities in Event of Termination 45 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 45 13.1 STOCKHOLDERS 45 13.2 ITP and NEWCO 46 13.3 Damages 46 13.4 Survival 46 14. STOCKHOLDERS' AGREEMENT 46 14.1 Stockholders' Agreement 46 15. FEDERAL SECURITIES ACT REPRESENTATIONS 47 15.1 Compliance with Law 47 15.2 Economic Risk: Sophistication 47 16. GENERAL 48 16.1 Cooperation 48 16.2 Successors and Assigns 48 16.3 Entire Agreement 48 16.4 Counterparts 49 16.5 Brokers and Agents 49 16.6 Expenses 49 16.7 Notices 49 16.8 Governing Law 50 16.9 Exercise of Rights and Remedies 50 16.10 Time 51 16.11 Reformation and Severability 51 16.12 Remedies Cumulative 51 16.13 Captions 51 16.14 Amendments and Waivers 51 ANNEX I FORM OF ARTICLES OF MERGER ANNEX II CERTIFICATE OF INCORPORATION AND BY-LAWS OF ITP AND NEWCO ANNEX III MERGER CONSIDERATION TO BE PAID TO STOCKHOLDERS ANNEX IV STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY ANNEX V STOCK OWNERSHIP OF ITP ANNEX VI FORM OF OPINION OF COUNSEL TO ITP ANNEX VII FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS ANNEX VIII FORM OF EMPLOYMENT AGREEMENT ANNEX IX FORM OF JOINDER AGREEMENT ANNEX X FORM OF PROMISSORY NOTE ANNEX XI FORM OF SUBORDINATION AGREEMENT ANNEX XII NORMALIZING ADJUSTMENTS OF THE COMPANY ANNEX XIII LETTER AGREEMENT WITH CERTAIN STOCKHOLDERS AGREEMENT AND PLAN OF ORGANIZATION THIS AGREEMENT AND PLAN OF ORGANIZATION (this "Agreement") is made as of January 8, 1998, by and among (i) IT PARTNERS, INC., a Delaware corporation ("ITP"), (ii) ITP NO. 10, INC., a Delaware corporation ("NEWCO"), (iii) SEQUOIA DIVERSIFIED PRODUCTS, INC., a Michigan corporation (the "COMPANY"), and (iv) JOHN D. BAMBERGER, as Trustee U-A, dated November 9, 1995, ALAN E. WISE, as Trustee U-A dated December 13, 1995, WILLIAM E. MURRAY, MICHAEL J. BALTOSIEWICH, as Trustee U-A dated October 20, 1972, CARL J. GRIFFIN, WILLIAM C. CHURCH and MICHAEL A. RYAN (collectively, the "NAMED STOCKHOLDERS" and together with the other shareholders of the COMPANY, the "STOCKHOLDERS"). WHEREAS, NEWCO is a corporation duly organized and existing under the laws of the State of Delaware, having been incorporated on December 12, 1997, solely for the purpose of completing the transactions set forth herein, and is a wholly-owned subsidiary of ITP; WHEREAS, the respective Boards of Directors of NEWCO and the COMPANY (which together are hereinafter collectively referred to as "Constituent Corporations") deem it advisable and in the best interests of the Constituent Corporations and their respective stockholders that the COMPANY merge with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and Michigan (the "Merger"), and in furtherance thereof have approved the Merger; WHEREAS, unless the context otherwise requires, capitalized terms used in this Agreement or in any schedule attached hereto and not otherwise defined herein shall have the following meanings for all purposes of this Agreement: "1933 Act" means the Securities Act of 1933, as amended. "1934 Act" means the Securities Exchange Act of 1934, as amended. "Acquired Party" means the COMPANY, any subsidiary and any member of a Relevant Group. "Acquisition Companies" means NEWCO and each of the other Delaware companies wholly-owned by ITP prior to the Closing Date. "Acquisition Transaction" has the meaning set forth in Section 7.4. "Affiliates" means any other person or entity that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with a person. "Agent" has the meaning set forth in Section 9.14. "Articles of Merger" means those Articles or Certificates of Merger with respect to the Merger substantially in the forms attached as Annex I hereto or with such changes therein as may be required by applicable state laws. "Balance Sheet" means the COMPANY's audited October 31, 1997 Balance Sheet prepared by ITP's independent accountants, Arthur Andersen, L.L.P. and delivered to the COMPANY. "Balance Sheet Date" means October 31, 1997. "Benefit Plan" means any Plan existing at the Closing Date or prior thereto, established or to which contributions have at any time been made by the COMPANY, any ERISA Affiliate, or any predecessor of any of the foregoing, under which any employee or former employee of the COMPANY, or any beneficiary thereof, is covered, is eligible for coverage or has benefit rights. "Charter Documents" has the meaning set forth in Section 5.1. "Closing" has the meaning set forth in Section 4. "Closing Date" has the meaning set forth in Section 4. "Code" means the Internal Revenue Code of 1986, as amended. "COMPANY" has the meaning set forth in the first paragraph of this Agreement. "Company Delivered Documents" means this Agreement and the Schedules attached hereto, as well as those documents, agreements and instruments to be executed and delivered by the COMPANY and the NAMED STOCKHOLDERS at the Closing in connection with this Agreement. "COMPANY Stock" has the meaning set forth in Section 2.1. "Constituent Corporations" has the meaning set forth in the second recital of this Agreement. "Contract" means any agreement, contract, lease, note, mortgage, indenture, loan agreement, franchise agreement, covenant, employment agreement, commitment, undertaking, obligation, whether written or oral, express or implied. "Debt" means all liabilities of the COMPANY for borrowed money. "EBITDA" means earnings before interest, taxes, depreciation and amortization prepared in accordance with GAAP. "Effective Time of the Merger" means the time as of which the Merger becomes effective, which the parties hereto contemplate will occur on the Closing Date. "Environmental Requirements" has the meaning set forth in Section 5.9(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ERISA Affiliate" means any Person who is, or at any time was, a member of a controlled group (within the meaning of Section 412(n)(6) of the Code) that includes, or at any time included, the COMPANY or any predecessor of the COMPANY. "Estimated Closing Date Balance Sheet" means a Closing Date balance sheet for the COMPANY prepared by the COMPANY and reviewed by ITP, which shall include an estimation of the Net Asset Value as of the Closing Date. "Expiration Date" has the meaning set forth in Section 5(A). "Final Closing Balance Sheet" means the Closing Date Balance Sheet as finally determined under Section 3.3. "Final Net Asset Value" means Net Asset Value as finally determined under Section 3.3. "Final FYE EBITDA" means the FYE EBITDA as finally determined under Section 3.3. "FYE EBITDA" means the EBITDA of the COMPANY for the twelve (12) month period ending December 31, 1997, subject to the normalizing adjustments of the COMPANY set forth on Annex XII hereto. "GAAP" means generally accepted accounting principles of the United States applied in a manner consistent with the past practices of the COMPANY. "Governmental Authority" means any governmental, regulatory or administrative body, agency, subdivision or authority, any court or judicial authority, or any public, private or industry regulatory authority, whether national, Federal, state, local or otherwise. "Hazardous Materials" has the meaning set forth in Section 5.9(a). "Intellectual Property" means trademarks, service marks, trade dress, trade names, patents and copyrights and any registration or application for any of the foregoing, and any trade secret, invention, discovery, method of doing business, process, know-how, including but not limited to, training techniques, training materials, computer software (including source and object code), databases, technology systems and integration techniques, product design and product packaging. "IPO" means the sale of ITP Common Stock by or for the account of ITP pursuant to an initial public offering registered under the 1933 Act. "ITP" has the meaning set forth in the first paragraph of this Agreement. "ITP Charter Documents" has the meaning set forth in Section 6.1. "ITP Delivered Documents" means this Agreement and those documents, agreements and instruments to be executed and delivered by ITP and NEWCO at the Closing in connection with this Agreement. "ITP Expiration Date" has the meaning set forth in Section 6. "ITP Stock" means the common stock, par value $.01 per share, of ITP. "Knowledge", "awareness" or similar expressions mean only the actual knowledge of the individual to which the expression is applicable. When such terms are used in connection with the knowledge of a corporate entity, such knowledge shall include only the actual knowledge of the officers or directors of that corporate entity. "Lien" has the meaning set forth in Section 5.6. "Material Adverse Effect" has the meaning set forth in Section 5.1. "Material Contract" means any Contract set forth on Schedule 5.8, 5.10, 5.11, 5.12 or 5.14 or any other Contract to which the COMPANY is a party or by which its properties are bound which is material to the COMPANY. "Merger" means the merger of the COMPANY with and into NEWCO pursuant to this Agreement and the applicable provisions of the laws of the States of Delaware and Michigan, with NEWCO as the Surviving Corporation. "Net Asset Value" means the COMPANY's net worth as determined in accordance with GAAP. "Net Asset Value Adjustment" has the meaning set forth in Section 3.3(a)(ii). "NEWCO" has the meaning set forth in the first paragraph of this Agreement. "NEWCO Stock" means the common stock, par value $.01 per share, of NEWCO. "Note" has the meaning set forth in Section 2.1(a). "Permitted Liens" means any purchase money security interests created in the ordinary course of business, any Liens for Taxes either not yet due or being contested in good faith and by appropriate proceedings (and for which adequate reserves have been established and are being maintained), and any materialmens', mechanics', workers', repairmens', employees' or other like Liens arising in the ordinary course of business. "Person" means any natural person, corporation, partnership, proprietorship, other business organization, trust, union, association or Governmental Authority. "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option, stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation, day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. "Proposed Final Closing Balance Sheet" means a Closing Date Balance Sheet for the COMPANY prepared by ITP in accordance with Section 3.3. "Relevant Group" has the meaning set forth in Section 5.18(a). "Returns" has the meaning set forth at the end of Section 5.18. "Schedule" means each Schedule attached hereto, which shall reference the relevant sections of this Agreement, on which parties hereto disclose information as part of their respective representations, warranties and covenants. "SEC" means the United States Securities and Exchange Commission. "Statutory Liens" has the meaning set forth in Section 7.3(e). "STOCKHOLDERS" has the meaning set forth in the first paragraph of this Agreement. "Surviving Corporation" shall mean NEWCO as the surviving party in the Merger. "Tax" or "Taxes" has the meaning set forth at the end of Section 5.18. "Taxing Authority" has the meaning set forth at the end of Section 5.18. "Transfer Taxes" has the meaning set forth in Section 17.6(c). "Working Capital Cash Needs" means that amount of cash and cash equivalents equal to $536,233. NOW, THEREFORE, in consideration of the premises and of the mutual agreements, representations, warranties, provisions and covenants herein contained, the parties hereto hereby agree as follows: 1. THE MERGER 1.1 Delivery and Filing of Articles of Merger. The Constituent Corporations will cause the Articles of Merger to be signed, verified and filed with the Secretary of State of the State of Delaware and the Department of Consumer and Industry Services of the State of Michigan and stamped receipt copies of each such filing to be delivered to ITP on or before the Closing Date. 1.2 Effective Time of the Merger. At the Effective Time of the Merger and subject to the terms and conditions of this Merger and the applicable provisions of the Delaware General Corporation Law ("Delaware Law") and the Michigan Business Corporation Act, as amended ("Michigan Law"), the COMPANY shall be merged with and into NEWCO in accordance with the Articles of Merger, the separate existence of the COMPANY shall cease and NEWCO shall be the Surviving Corporation in the Merger. At the Effective Time of the Merger, the effect of the Merger otherwise shall be as provided in the applicable provisions of Delaware Law and Michigan Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time of the Merger, all the property, rights, privileges, powers and franchises of the COMPANY and NEWCO shall vest in the Surviving Corporation, and all debts, liabilities and duties of the COMPANY and NEWCO shall become the debts, liabilities and duties of the Surviving Corporation. The Merger will be effected in a single transaction. 1.3 Certificate of Incorporation, By-laws and Board of Directors of Surviving Corporation. At the Effective Time of the Merger: (a) the Certificate of Incorporation of NEWCO then in effect shall be the Certificate of Incorporation of the Surviving Corporation until amended as provided by law; (b) the By-laws of NEWCO then in effect shall be the By-laws of the Surviving Corporation until amended as provided by law; (c) John D. Bamberger, Daniel J. Klein and Jamie E. Blech shall be the directors of the Surviving Corporation until their respective successors are elected or appointed and qualified in accordance with the terms the By-laws of the Surviving Corporation; the Board of Directors of the Surviving Corporation shall hold office subject to the provisions of the laws of the State of Delaware and of the Certificate of Incorporation and By-laws of the Surviving Corporation; and (d) the officers of the COMPANY immediately prior to the Effective Time of the Merger shall continue as the officers of the Surviving Corporation in the same capacity or capacities, and effective upon the Effective Time of the Merger, except that John D. Bamberger shall also be appointed Vice Chairman of the Board of the Surviving Corporation. In addition, Daniel J. Klein shall be appointed Chairman of the Board of the Surviving Corporation and Jamie E. Blech shall be appointed vice president and assistant secretary of the Surviving Corporation, each such officer to serve, subject to the provisions of the Certificate of Incorporation and By-laws of the Surviving Corporation, until his or her successor is duly elected and qualified. (e) Subject to the provisions of the Stockholders' Agreement referred to in Section 9.12 hereof and subject to the provisions of the laws of the State of Delaware, ITP shall, for the period beginning on the Closing Date and ending on the effective time of an IPO, appoint and retain John D. Bamberger as a director of ITP and, after the effective time of an IPO, shall use its best efforts to have John D. Bamberger nominated and appointed as a director of ITP to serve until his successor is duly elected and qualified. 1.4 Certain Information With Respect to the Capital Stock of the COMPANY, ITP and NEWCO. The respective designations and numbers of outstanding shares and voting rights of each class of outstanding capital stock of the COMPANY, ITP and NEWCO as of the date of this Agreement are as follows: (a) as of the date of this Agreement, the authorized capital stock of the COMPANY is as set forth on Schedule 1.4 hereto; (b) immediately prior to the Closing Date, the authorized capital stock of ITP will consist of ten million shares of ITP Stock and two million shares of preferred stock, par value $.01 per share ("Preferred Stock"); and (c) as of the date of this Agreement, the authorized capital stock of NEWCO consists of 1,000 shares of NEWCO Stock, of which 100 shares are issued and outstanding and beneficially owned by ITP. 2. CONVERSION OF STOCK 2.1 Manner of Conversion. The manner of converting the shares of (i) outstanding capital stock of the COMPANY ("COMPANY Stock") and (ii) NEWCO Stock, issued and outstanding immediately prior to the Effective Time of the Merger, respectively, into shares of (x) ITP Stock and (y) common stock of the Surviving Corporation, respectively, shall as of the Effective Time of the Merger be as follows: (a) all of the shares of COMPANY Stock issued and outstanding immediately prior to the Effective Time of the Merger will be canceled and extinguished and, by virtue of the Merger and without any action on the part of the holder thereof, automatically shall be deemed to represent, with respect to each STOCKHOLDER, (1) the right to receive the number of shares of ITP Stock set forth on Annex III hereto with respect to such STOCKHOLDER; (2) the right to receive the amount of cash set forth on Annex III hereto with respect to such STOCKHOLDER; and (3) the right to receive a subordinated promissory note (the "Note") issued by ITP in an amount specified on Annex III hereto with respect to such STOCKHOLDER (collectively, the "Merger Consideration") and with the terms specified in Annex X hereto and subject to a Subordination Agreement in the form attached hereto as Annex XI; (b) all shares of COMPANY Stock that are held by the COMPANY as treasury stock shall be canceled and retired and no shares of ITP Stock or other consideration shall be delivered or paid in exchange therefor; and (c) each share of NEWCO Stock issued and outstanding immediately prior to the Effective Time of the Merger shall, by virtue of the Merger and without any action on the part of ITP, automatically be converted into one fully paid and non-assessable share of common stock of the Surviving Corporation, which shall constitute all of the issued and outstanding shares of common stock of the Surviving Corporation immediately after the Effective Time of the Merger. 2.2 Rights -- ITP Stock. All ITP Stock received by the STOCKHOLDERS pursuant to this Agreement shall, except for restrictions on resale or transfer described in Sections 14 and 15 hereof, have the same rights as all the other shares of outstanding ITP Stock by reason of the provisions of the Certificate of Incorporation of ITP or as otherwise provided by the Delaware Law. 3. DELIVERY OF MERGER CONSIDERATION; CLOSING AND POST-CLOSING ADJUSTMENTS 3.1 (a) Delivery of Merger Consideration. At the Effective Time of the Merger and on the Closing Date, the STOCKHOLDERS, who are the holders of all outstanding certificates representing shares of COMPANY Stock, upon surrender of such certificates and subject to the adjustments specified under Sections 3.2 and 3.3 below shall receive (i) the respective number of shares of ITP Stock set forth on Annex III; (ii) the amount of cash set forth on Annex III hereto with respect to such STOCKHOLDER; and (iii) a Note issued by ITP in an amount specified on Annex III hereto with respect to such STOCKHOLDER and with the terms specified in Annex X hereto and subject to a Subordination Agreement in the form attached hereto as Annex XI. The cash payable pursuant to clause (ii) shall be paid by wire transfer to the STOCKHOLDERS in immediately available funds. (b) Certificate Delivery. To the extent practicable, the STOCKHOLDERS shall deliver to Piper & Marbury L.L.P., counsel to ITP, at the Closing the certificates, representing all of the COMPANY Stock, duly endorsed in blank by the STOCKHOLDERS, or accompanied by stock powers duly endorsed in blank, with signatures guaranteed by a national or state chartered bank or other financial institution, and with all necessary Transfer Tax and other revenue stamps, acquired at the STOCKHOLDERS' expense, affixed and canceled. The STOCKHOLDERS agree promptly to cure any deficiencies with respect to the endorsement of the stock certificates or other documents of conveyance with respect to such COMPANY Stock or with respect to the stock powers accompanying any COMPANY Stock. Upon consummation of the transactions contemplated to occur on the Closing Date, all of such certificates shall be deemed released by such counsel to ITP without any further action on the part of such counsel. 3.2 Closing Date Adjustments to Merger Consideration. On the Closing Date, the amount of cash payable shown on Annex III shall be (x) reduced by an amount equal to any Debt reflected on the Estimated Closing Date Balance Sheet, and (y) reduced by the amount by which Working Capital Cash Needs exceeds cash and cash equivalents as reflected on the Estimated Closing Date Balance Sheet (the "Closing Date Adjustments"). Any additional payments from the STOCKHOLDERS arising from the Closing Date Adjustments shall be paid by and allocated among the STOCKHOLDERS in accordance with the provisions set forth in Annex III under the caption "Post-Closing Adjustments to Merger Consideration". All such additional payments shall be made by the STOCKHOLDERS within five (5) business days after such final determination. In the event that any of the STOCKHOLDERS are required to make any payments to ITP in the form of the ITP Stock or the Notes, such STOCKHOLDERS shall return to ITP (i) certificates evidencing sufficient shares of ITP Stock necessary to comply with the additional payments required, and (ii) the Notes previously issued to such STOCKHOLDERS; promptly after the return of the foregoing, ITP shall reissue certificates for the ITP Stock and the Notes to the STOCKHOLDERS in accordance with such final determination. In the event that the STOCKHOLDERS are required to make any payments in the form of cash, such payments shall be made in immediately available funds by wire transfer, cashier's check or other mutually agreed upon manner. 3.3 Post-Closing Adjustments to Merger Consideration. (a) Net Asset Value Adjustment. (i) On January 31, 1998, ITP, together with its accountants, shall prepare and deliver to STOCKHOLDERS' accountants a Proposed Final Closing Balance Sheet prepared on a basis consistent with the Balance Sheet. The Proposed Final Closing Balance Sheet shall include an evaluation of the Net Asset Value at the Closing Date. The Proposed Final Closing Balance Sheet shall be accompanied by a report of ITP's accountants. The STOCKHOLDERS and STOCKHOLDERS' accountants shall have the right to consult during reasonable business hours with appropriate personnel of ITP and ITP's accountants and to have access to, and to review and make copies of, the work papers of ITP and ITP's accountants with respect to the preparation of the Proposed Closing Balance Sheet. (ii) If the Final Net Asset Value is less than the Net Asset Value shown on the Estimated Closing Date Balance Sheet, the STOCKHOLDERS shall pay to ITP the difference plus interest thereon from the Closing Date through the date of payment at a rate per annum, which may fluctuate from time to time, equal to the then prime rate of Citibank (the "Net Asset Value Adjustment"). Any additional payments from the STOCKHOLDERS arising from the Net Asset Value Adjustment shall be paid by and allocated among the STOCKHOLDERS in accordance with the provisions set forth in Annex III under the caption "Post-Closing Adjustments to Merger Consideration". All such additional payments shall be made by the STOCKHOLDERS within five (5) business days after such final determination. In the event that any of the STOCKHOLDERS are required to make any payments to ITP in the form of the ITP Stock or the Notes, such STOCKHOLDERS shall return to ITP (i) certificates evidencing sufficient shares of ITP Stock necessary to comply with the additional payments required, and (ii) the Notes previously issued to such STOCKHOLDERS; promptly after the return of the foregoing, ITP shall reissue certificates for the ITP Stock and the Notes to the STOCKHOLDERS in accordance with such final determination. In the event that the STOCKHOLDERS are required to make any payments in the form of cash, such payments shall be made in immediately available funds by wire transfer, cashier's check or other mutually agreed upon manner. (b) Subsequent Valuation Adjustment. (i) On January 31, 1998, upon presentation of financial statements accompanied by a report of ITP's accountants reflecting the COMPANY's FYE EBITDA, the consideration received by the STOCKHOLDERS will be adjusted (i) upward by the amount by which FYE EBITDA multiplied by 8.86 (the "Subsequent Valuation") exceeds the Merger Consideration, or (ii) downward by the amount by which the Subsequent Valuation is less than the Merger Consideration. The STOCKHOLDERS and STOCKHOLDERS' accountants shall have the right to consult during reasonable business hours with appropriate personnel of ITP and ITP's accountants and to have access to, and to review and make copies of, the work papers of ITP and ITP's accountants with respect to the preparation of the financial statements reflecting the COMPANY's FYE EBITDA. (ii) The consideration payable pursuant to this Section 3.3(b) to or by the STOCKHOLDERS shall be paid by or to and allocated among the STOCKHOLDERS in accordance with the provisions set forth in Annex III under the caption "Post-Closing Adjustments to Merger Consideration"; provided however, that the aggregate value of merger consideration payable to the STOCKHOLDERS shall not exceed $27,500,000. In the event that any of the STOCKHOLDERS are required to make any payments to ITP in the form of the ITP Stock or the Notes, such STOCKHOLDERS shall return to ITP (i) certificates evidencing sufficient shares of ITP Stock necessary to comply with the additional payments required, and (ii) the Notes previously issued to such STOCKHOLDERS; promptly after the return of the foregoing, ITP shall reissue certificates for the ITP Stock and the Notes to the STOCKHOLDERS in accordance with such final determination. In the event that ITP or the STOCKHOLDERS are required to make any payments in the form of cash, such payments shall be made in immediately available funds by wire transfer, cashier's check or other mutually agreed upon manner. (c) Procedure to Resolve Dispute. (i) The STOCKHOLDERS may dispute the Proposed Final Closing Balance Sheet and the determination of FYE EBITDA prepared by ITP and ITP's accountants by notice to ITP setting forth in reasonable detail the amounts in dispute and the basis for such dispute within 45 days of its receipt of the Proposed Final Closing Balance Sheet and the determination of FYE EBITDA. If the STOCKHOLDERS fail to deliver a notice of objections within such 45-day period, the STOCKHOLDERS shall be deemed to have accepted the Proposed Final Closing Date Balance Sheet (including the Net Asset Value thereon) and the determination of FYE EBITDA. If the aggregate amounts in dispute are less than $100,000, the Net Asset Value and the FYE EBITDA proposed by ITP shall be adjusted by one-half of the dispute amount which shall then constitute the Final Closing Balance Sheet, the Final Net Asset Value and the Final FYE EBITDA. (ii) If the amounts in dispute exceed $100,000, ITP's accountants and the STOCKHOLDERS' accountants shall attempt in good faith to resolve such dispute, and any resolution as to any disputed amounts shall be final, binding and conclusive. If there is no resolution of any such dispute within 15 days of the date of receipt by ITP of a written notice of dispute, ITP and the STOCKHOLDERS shall, within five additional days, retain Coopers & Lybrand, L.L.P., which firm shall, within 30 days of each submission, resolve such remaining dispute, and provide written notice of such resolution by facsimile, confirmed by mail, and such resolution shall be binding and conclusive. Such resolution shall be within the range of amounts proposed by ITP's accountants and the amount proposed by the STOCKHOLDERS' accountants as to each disputed item. The fees and disbursements of Coopers & Lybrand, L.L.P. shall be borne by ITP and the STOCKHOLDERS in the proportion that the aggregate amount of disputed items submitted to Coopers & Lybrand, L.L.P. that is unsuccessfully disputed by each party (as finally determined by Coopers & Lybrand, L.L.P.) bears to the total amount of the disputed items as submitted to Coopers & Lybrand, L.L.P. After resolving the items in dispute, Coopers & Lybrand, L.L.P. shall prepare and deliver a Final Closing Balance Sheet (including a certification of the Final Net Asset Value thereon) and a final determination of FYE EBITDA. 4. CLOSING At or prior to the Closing (as defined below), the parties shall take all actions necessary to prepare to (i) effect the Merger (including, if permitted by applicable state law and if desired by the parties hereto, the advance filing with the appropriate state authorities of the Articles of Merger, which shall become effective at the Effective Time of the Merger) and (ii) effect the conversion and delivery of shares referred to in Section 2 hereof; provided, that such actions shall not include the actual completion of the Merger for purposes of this Agreement or the conversion and delivery of the shares and transmission of funds by wire referred to in Section 3 hereof, which actions shall only be taken upon the Closing Date as herein provided. If there is no Closing Date and this Agreement terminates, ITP hereby covenants and agrees to do all things required by Delaware Law and all things which counsel for the COMPANY advise ITP are required by Michigan Law in order to rescind any merger or other actions effected by the advance filing of the Articles of Merger as described in this Section. The taking of the actions described in clauses (i) and (ii) above shall take place on the date which is mutually agreeable to the COMPANY and ITP at the offices of Piper & Marbury L.L.P., Charles Center South, 36 South Charles Street, Baltimore, Maryland 21201, or upon consent of the parties, via facsimile and overnight courier. On the Closing Date (x) the Articles of Merger shall be or shall have been filed with the appropriate state authorities so that they shall be or, as of 11:00 a.m. Eastern Time on the Closing Date, shall become effective and the Merger shall thereby be effected, and (y) all transactions contemplated by this Agreement, including the conversion and delivery of shares, issuance of the Note, and the transmission of funds by wire pursuant to Section 3 hereof shall occur. The date on which the actions described in the preceding clauses (x) and (y) occurs (the "Closing") shall be referred to as the "Closing Date." 5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS (A) Representations and Warranties of the COMPANY and the STOCKHOLDERS. Each of the COMPANY, John D. Bamberger and Alan E. Wise jointly and severally represents and warrants and each of the other NAMED STOCKHOLDERS severally, but not jointly, represents and warrants to ITP and NEWCO that all of the following representations and warranties in this Section 5 are true at the Closing Date (subject to Section 7.7 hereof), and that such representations and warranties shall survive the Closing Date for a period of eighteen (18) months (the last day of such period being the "Expiration Date"), except that the representations and warranties set forth in Sections 5.9 and 5.18 hereof shall survive until such time as the applicable statute of limitations period has run, which shall be deemed to be the Expiration Date for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean and refer to the COMPANY and all of its subsidiaries, if any. 5.1 Due Organization. The COMPANY is a corporation duly incorporated, validly existing and in good standing under the laws of the state of its incorporation, and is duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on its business in the places and in the manner as now conducted except to the extent any such failure to be so authorized or qualified would not have a materially adverse effect on the COMPANY's business, condition (financial or other), properties, business prospects or results of operations (as used herein with respect to the COMPANY, or with respect to any other person, a "Material Adverse Effect"), to own or hold under lease the properties and assets it now owns or holds under lease, and to perform all of its obligations under the Material Contracts; is duly qualified in the jurisdictions listed in Schedule 5.1 (except for the State of Ohio) and there are no other jurisdictions in which the conduct of the COMPANY's business or activities or its ownership of assets requires any other qualification under applicable law, the absence of which would have a Material Adverse Effect. True, complete and correct copies of the Articles of Incorporation and By-laws (except the By-laws of the foreign subsidiaries of the COMPANY), each as amended, of the COMPANY (the "Charter Documents") are all attached to Schedule 5.1. The minute books and stock records of the COMPANY, as heretofore made available to ITP, are correct and complete in all material respects. 5.2 Authorization. The representatives of the COMPANY executing this Agreement have the authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution and delivery of this Agreement and the Company Delivered Documents and performance by the COMPANY of its obligations under this Agreement and the Company Delivered Documents and the consummation by the COMPANY of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action in accordance with applicable law and the Articles of Incorporation and By-Laws of the COMPANY on the part of the COMPANY and the STOCKHOLDERS. This Agreement constitutes the valid and binding obligation of the COMPANY, enforceable in accordance with its terms except as the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and general equitable principles regardless of whether such enforceability is considered in a proceeding at law or in equity. 5.3 Capital Stock of the COMPANY. The entire authorized capital stock of the COMPANY is as set forth in Schedule 1.4. All of the issued and outstanding shares of capital stock of the COMPANY are owned by the STOCKHOLDERS in the amounts set forth in Annex IV and, except as set forth on Schedule 5.3, are owned free and clear of all liens, security interests, pledges, charges, voting trusts, restrictions, encumbrances and claims of every kind. Except as disclosed on Schedule 5.3, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements to which the COMPANY or the STOCKHOLDERS is a party requiring or restricting issuance, sale or transfer of any equity securities of the COMPANY or any securities convertible directly or indirectly into equity securities of the COMPANY, or evidencing the right to subscribe for any equity securities of the COMPANY, or giving any person any rights with respect to the capital stock of the COMPANY. Except as contemplated by this Agreement or disclosed on Schedule 5.3, there are no voting agreements, voting trusts, other agreements (including cumulative voting rights), commitments or understandings with respect to the capital stock of the COMPANY. All of the issued and outstanding shares of capital stock of the COMPANY have been duly authorized and validly issued, are fully paid and nonassessable, and are owned of record and beneficially by the STOCKHOLDERS. 5.4 Subsidiaries. Schedule 5.4 attached hereto lists the name of each of the COMPANY's subsidiaries and sets forth the number and class of the authorized capital stock of each of the COMPANY's subsidiaries and the number of shares of each of the COMPANY's subsidiaries which are issued and outstanding, all of which shares (except as set forth on Schedule 5.4) are owned by the COMPANY, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 5.4, the COMPANY does not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity, nor is the COMPANY, directly or indirectly, a participant in any joint venture, partnership or other non-corporate entity. 5.5 Financial Statements. The COMPANY has delivered to ITP copies of the following unaudited financial statements, copies of which are attached hereto as Schedule 5.5 (collectively, the "Financial Statements"): (a) Balance Sheet, Income Statement, Statement of Stockholders' Equity and Statement of Cash Flows at and for the year ended December 31, 1995 and Balance Sheet at December 31, 1996; and (b) Balance Sheets, Income Statements, Statements of Stockholders' Equity, and Statements of Cash Flows at and for the interim period ended October 31, 1997. Each of the Financial Statements is consistent with the books and records of the COMPANY (which, in turn, are accurate and complete in all material respects) and fairly presents the COMPANY's financial condition, assets and liabilities as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, consistently applied among the periods which are the subject of the Financial Statements, except unaudited interim financial statements which were or are subject to normal year-end adjustments which were not and are not expected to be material in amount and the addition of required footnotes thereto. The COMPANY has not deferred recognition of any of its accounts payable or accelerated recognition of any of its accounts receivable. 5.6 Liabilities and Obligations. The COMPANY's assets, tangible or intangible, are owned by the COMPANY free and clear of any liens, claims, mortgages, encumbrances, pledges, security interests, equities and charges of any kind (each, a "Lien"), except for the items listed on Schedule 5.6 and the Permitted Liens. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.6) as of the Balance Sheet Date of (i) all liabilities of the COMPANY known to the COMPANY in excess of $10,000 which are not reflected on the balance sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the COMPANY Financial Statements at the Balance Sheet Date and which are required by GAAP to be disclosed thereon, and (ii) all material loan agreements, indemnity or guaranty agreements, bonds, mortgages, liens, pledges or other security agreements to which the COMPANY is a party, except for the Permitted Liens. Except as set forth on Schedule 5.6, and except as otherwise described or disclosed in this Agreement (or the Schedules, Exhibits or Annexes attached hereto), or reflected in the Financial Statements, to the knowledge of the Named Stockholders since the Balance Sheet Date the COMPANY has not incurred any liabilities in excess of $10,000 of any kind, character and description, whether accrued, absolute, secured or unsecured, contingent or otherwise, other than liabilities incurred in the ordinary course of business. 5.7 Accounts and Notes Receivable. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.7) of the accounts and notes receivable of the COMPANY as of the Balance Sheet Date. Within ten (10) days prior to Closing, the COMPANY shall provide ITP (x) an accurate list of all outstanding receivables arising since the Balance Sheet Date and as of a date which is within ten (10) calendar days of the Closing Date and (y) an aging of all such accounts and notes receivable showing amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the extent reflected on Schedule 5.7, the accounts, notes and other receivables shown on Schedule 5.7 and on the A/R Aging Reports are, and the COMPANY has no reason to believe that any such account receivable is not, collectible in the amounts shown net of reserves reflected in the balance sheet as of the Balance Sheet Date. 5.8 Intellectual Property; Permits and Intangibles. (a) To the knowledge of the COMPANY, the COMPANY owns or has valid licenses to all Intellectual Property required for or otherwise used in connection with the conduct of its business and the COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.8(a)) of all Intellectual Property owned or used by the COMPANY including a list of all licenses and sublicenses granted by or to the COMPANY with respect to any Intellectual Property. To the COMPANY's knowledge, each item of Intellectual Property owned by or licensed to the COMPANY is valid and in full force and effect. To the knowledge of the COMPANY, except as set forth on Schedule 5.8(a), all right, title and interest in and to each item of Intellectual Property owned by or licensed to the COMPANY is not subject to any restriction, royalty or fee arrangement or pending or threatened claim or dispute. To the COMPANY's knowledge, none of the Intellectual Property owned by or licensed to the COMPANY nor any product sold or licensed or service provided by the COMPANY, infringes any Intellectual Property right of any other person or entity and to the COMPANY's knowledge, no Intellectual Property owned by or licensed to the COMPANY is infringed upon by any other person or entity. (b) The COMPANY holds all licenses, franchises, permits and governmental authorizations the absence of any of which would be reasonably likely to have a Material Adverse Effect (the "Material Licenses"), and the COMPANY has delivered to ITP an accurate list and summary description (which is set forth on Schedule 5.8(b)) of all such Material Licenses, including permits, licenses, franchises and certificates (a list of all environmental- related Material Licenses is set forth on Schedule 5.9). To the COMPANY's knowledge, the Material Licenses listed on Schedules 5.8(b) and 5.9 are valid and in effect, and the COMPANY has not received any notice that any Governmental Authority intends to cancel, terminate or not renew any such license, franchise, permit or other governmental authorization. To the COMPANY's knowledge, the COMPANY has conducted and is conducting its business in compliance in all material respects with the requirements, standards, criteria and conditions set forth in the Material Licenses on Schedules 5.8(b) and 5.9 and is not in material violation of any of the foregoing or of any related regulatory or legal requirements except where such non-compliance or violation would not have a Material Adverse Effect. Except as specifically provided in Schedule 5.8(a) or 5.8(b), the transactions contemplated by this Agreement will not (i) to COMPANY'S knowledge, result in the infringement or misappropriation by the COMPANY of any Intellectual Property right of any other person or entity, or (ii) result in a default under or a breach or violation of, or adversely affect the rights and benefits afforded to the COMPANY by, any Material Licenses listed on Schedule 5.8(b) or any contracts involving the grant to the COMPANY of any rights relating to the Intellectual Property of any third party. (c) To the COMPANY's knowledge, the COMPANY's products and services conform in all material respects with any material applicable specification, documentation, performance standard, or contractual commitment by the COMPANY existing with respect thereto, and there are no unresolved material claims under warranty, contract or otherwise with respect to the COMPANY's services or products, except where any of the foregoing would not have a Material Adverse Effect. 5.9 Environmental Matters. (a)(i) "Environmental Requirements" for purposes of this Agreement shall mean all applicable federal, state and local laws, rules, regulations, ordinances and requirements relating to Hazardous Materials (as defined below), pollution, or protection of the environment, health or safety, all as amended and as in effect as of the date hereof. (ii) "Hazardous Materials" for purposes of this Agreement shall include, without limitation: (A) hazardous materials, hazardous substances, extremely hazardous substances, hazardous chemicals, toxic chemicals, toxic substances, pollutants, contaminants, solid wastes or hazardous wastes, as those terms are defined or used in the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. sec 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C. sec 6901 et seq. ("RCRA"), the Clean Water Act, 33 U.S.C. sec 1251 et seq., the Clean Air Act, 42 U.S.C. sec 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. sec 2601 et seq., the Emergency Planning and Community Right to Know Act, 42 U.S.C. sec 11001 et seq., the Occupational Safety and Health Act, and any other Environmental Requirements and other terms of similar import or meaning; (B) petroleum and petroleum products, including, without limitation, crude oil or any faction thereof; (C) any radioactive material, including, without limitation, any source, special nuclear, or by-product material as defined in 42 U.S.C. sec 2011 et seq.; and (D) asbestos in any form or condition. (b) Except as set forth on Schedule 5.9: (i) the COMPANY and each of its predecessors and subsidiaries are and at all times have been in compliance in all material respects with, and are not and have not been in violation of or liable under, all Environmental Requirements; (ii) the COMPANY and each of its predecessors and subsidiaries possess all Material Licenses required by all Environmental Requirements, and have filed all notices or applications required thereby; (iii) no environmental clearances, approvals or consents are required under applicable law from any Governmental Authority or entity in order to consummate the transactions contemplated in this Agreement or for the COMPANY to continue operations after the Closing Date; (iv) (A) the COMPANY and each of its predecessors and subsidiaries are not subject to, and have not received any notice of, any private, administrative or judicial claim or action, or notice of any intended private, administrative or judicial claim or action or received any request for information relating to the presence or alleged presence of Hazardous Materials (1) in, under or upon any real property currently or formerly owned, leased, operated or used by (a) the COMPANY or any of its predecessors or subsidiaries or (b) any other person that has, at any time, disposed of Hazardous Materials on behalf of the COMPANY or any of its predecessors or subsidiaries; or (2) ever possessed, owned or generated by or on behalf of the COMPANY or any of its predecessors or subsidiaries at any location; (B) to the COMPANY's knowledge, there is no basis for any such notice, claim, action or request; and (C) there are no pending or, to the knowledge of the COMPANY and each of its predecessors and subsidiaries, threatened claims, actions or proceedings (or notices of potential claims, actions or proceedings) from any Governmental Authority or any other entity regarding any matter relating to health, safety or protection of the environment against the COMPANY or any of its predecessors and subsidiaries. (v) To the COMPANY'S knowledge, there are and have been no past or present events, conditions, circumstances, activities, practices, incidents or actions which materially interfere with or prevent continued compliance by the COMPANY or the Surviving Corporation with any Environmental Requirements, give rise to any legal obligation or liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation against or involving the COMPANY or any real property presently or previously owned or used by the COMPANY under any Environmental Requirements or related common law theories; (vi) No real property currently or formerly owned or operated by the COMPANY or any of its predecessors or subsidiaries is or was listed on the National Priorities List, the CERCLIS or any similar state or local list of potential or confirmed hazardous waste sites; (vii) To the COMPANY's knowledge, no conditions exist on adjacent properties that threaten the environmental condition or safety of any property owned, operated or used by the COMPANY; and (viii) The COMPANY and its predecessors and subsidiaries have not released or disposed of any Hazardous Materials at any property owned or used by the COMPANY or its predecessors or subsidiaries, except as in compliance with the Environmental Requirements and, to the COMPANY's knowledge, no other person has released or disposed of Hazardous Materials at any such property, except as in compliance with the Environmental Requirements. 5.10 Personal Property. The COMPANY has delivered to ITP's independent accountants, Arthur Andersen, LLP, an accurate list (which is set forth on Schedule 5.10) of (x) all personal property with a fair market value in excess of $10,000 which is included (or that will be included) in "depreciable plant, property and equipment" (or similarly named line item) on the balance sheet of the COMPANY as of the Balance Sheet Date, (y) all other personal property owned by the COMPANY with a value individually in excess of $10,000 (i) as of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z) all leases and agreements in respect of personal property, including, in the case of each of (x), (y) and (z), true, complete and correct copies of all such leases which have been provided to ITP's counsel. Except as set forth on Schedule 5.10, (i) all personal property with a value individually in excess of $10,000 used by the COMPANY in its business is either owned by the COMPANY or leased by the COMPANY pursuant to a lease included on Schedule 5.10, (ii) all of the personal property listed on Schedule 5.10 is in good working order and condition, ordinary wear and tear excepted, and (iii) all leases and agreements included on Schedule 5.10 are in full force and effect and constitute valid and binding agreements of the COMPANY, and to the COMPANY's knowledge, of the other parties thereto in accordance with their respective terms. 5.11 Significant Customers; Material Contracts and Commitments. (a) The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.11(a)) of all significant customers, it being understood and agreed that a "significant customer," for purposes of this Section 5.11, means a customer (or person or entity) representing 5% or more of the COMPANY's total annual revenues as of the ten month period ended on the Balance Sheet Date. Except to the extent set forth on Schedule 5.11(a), none of the COMPANY's significant customers has, since the Balance Sheet Date, canceled or substantially reduced or, to the knowledge of the COMPANY, is currently attempting or threatening to cancel a contract or substantially reduce utilization of the services provided by the COMPANY. (b) Except as listed or described on Schedule 5.11(b), as of or on the date hereof, neither the COMPANY is a party to or bound by, nor do there exist any, Contracts relating to or in any way affecting the operation or ownership of the COMPANY's business that are of a type described below: (a) any collective bargaining arrangement with any labor union or any such agreement currently in negotiation or proposed; (b) any Contract for capital expenditures or the acquisition or construction of fixed assets for or in respect to real property other than in the COMPANY's ordinary course of business in excess of $10,000; (c) any Contract with a term in excess of one year for the purchase, maintenance, acquisition, sale or furnishing of materials, supplies, merchandise, machinery, equipment, parts or other property or services (except that the COMPANY need not list any such contract made in the ordinary course of business) which requires aggregate future payments of greater than $10,000; (d) any Contract relating to the borrowing of money, or the guaranty of another person's borrowing of money, including, without limitation, all notes, mortgages, indentures and other obligations, agreements and other instruments for or relating to any lending or borrowing, including assumed indebtedness; (e) any Contract granting any person a Lien on any of the assets of the COMPANY, in whole or in part, except for any Permitted Liens; (f) any Contract granting to any person a first-refusal, first- offer or similar preferential right to purchase or acquire any of the assets of the COMPANY's business other than in the ordinary course of business; (g) any Contract under which the COMPANY is (i) a lessee or sublessee of any machinery, equipment, vehicle or other tangible personal property or real property, or (ii) a lessor of any real property or tangible personal property owned by the COMPANY, in either case having an original value in excess of $10,000; (h) any contract providing for the indemnification of any officer, director, employee or other person (excluding any provisions in the Charter Documents); (i) any joint venture agreement or partnership contract; and (j) any other Contract with a term in excess of one year, whether or not made in the ordinary course of business, which involves or may involve payments in excess of $10,000 (except for the Real Property Leases (as defined in Section 5.12)). The COMPANY has provided ITP with a true and complete copy of each written Material Contract, including all amendments or other modifications thereto, except for the leases referred to under Section 5.11(b)(g)(ii), which shall be delivered to ITP on or before January 19, 1998. Except as set forth on Schedule 5.11(b), each Material Contract is a valid and binding obligation of the COMPANY, enforceable in accordance with its terms, and is in full force and effect. Except as set forth on Schedule 5.11(b), the COMPANY has performed all obligations required to be performed by it under each Material Contract and neither the COMPANY nor, to the knowledge of the COMPANY, any other party to any Material Contract, is (with or without the lapse of time or the giving of notice or both) in breach or default in any material respect thereunder; and, to the knowledge of the COMPANY there exists no condition which would constitute a breach or default thereunder. The COMPANY has not been notified that any party to any Material Contract intends to cancel, terminate, not renew or exercise an option under any Material Contract, whether in connection with the transactions contemplated hereby or otherwise. 5.12 Real Property. (a) The COMPANY owns no real property. (b) Schedule 5.12(b) includes an accurate list of real property leases to which the COMPANY is a party (the "Real Property Leases"). Counsel to ITP has been provided with true, complete and correct copies of all the Real Property Leases. Except as set forth on Schedule 5.12(b), all of such leases included on Schedule 5.12(b) are in full force and effect and constitute valid and binding agreements of the COMPANY and, to the COMPANY's knowledge, of the parties thereto in accordance with their respective terms. 5.13 Insurance. The COMPANY has delivered to ITP: (a) true and complete copies of all certificates of insurance evidencing insurance policies to which the COMPANY is a party or under which the COMPANY, or any director of the COMPANY, is or has been covered at any time within two years preceding the date of this Agreement; (b) true and complete copies of all pending applications for policies of insurance; and (c) any statement made by the auditor of the COMPANY's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. 5.14 Compensation; Employment Agreements; Organized Labor Matters. The COMPANY has delivered to ITP an accurate list (which is set forth on Schedule 5.14) showing as of December 1, 1997, all officers, directors and key employees of the COMPANY, listing all employment agreements with such officers, directors and key employees and the rate of compensation of each of such persons as of the date hereof. The COMPANY has provided to ITP true, complete and correct copies of any employment agreements for persons listed on Schedule 5.14. Since the Balance Sheet Date, there have been no increases in the compensation payable or any special bonuses to any officer, director, key employee or other employee, except ordinary salary increases and bonuses implemented on a basis consistent with past practices. Except as set forth on Schedule 5.14, there is no, and within the last three years the COMPANY and Manage Pro, Inc., have not experienced any, strike, picketing, boycott, work stoppage or slowdown, other similar labor dispute, union organizational activity, allegation, charge or complaint of unfair labor practice, employment discrimination pending or, to the COMPANY's knowledge, threatened against the COMPANY or Manage Pro, Inc. 5.15 Employee Plans. The COMPANY has delivered to ITP an accurate schedule (which is set forth on Schedule 5.15) showing all Benefit Plans, together with true, complete and correct copies of such Benefit Plans, agreements and any trusts related thereto, summary plan descriptions thereof, the last determination letter (if any) issued to each Benefit Plan by the Internal Revenue Service, and the last Forms 5500 filed for such Benefit Plans. 5.16 Compliance with ERISA. (a) All Benefit Plans that are intended to qualify under Section 401(a) of the Code are and have been so qualified and have been determined by the Internal Revenue Service to be so qualified. (b) Except as disclosed on Schedule 5.16, all reports and other documents required to be filed with any Governmental Authority or distributed to plan participants or beneficiaries (including, but not limited to, actuarial reports, audits or tax returns) have been timely filed or distributed. (c) None of the NAMED STOCKHOLDERS, any such Benefit Plan, nor the COMPANY has engaged in any transactions prohibited under the provisions of Section 4975 of the Code or Section 406 of ERISA and for which no individual or class exemption exists. (d) No material pending claim or lawsuit has been asserted or instituted by or against a Benefit Plan, against the assets of a trust under a Benefit Plan or by or against the plan sponsor, plan administrator, or any fiduciary of a Benefit Plan (other than routine claims for benefits), and the COMPANY has no knowledge of any fact which could form the basis for any such claim or lawsuit. (e) Each Benefit Plan (including without limitation a Benefit plan covering retirees or their beneficiaries) may be terminated or amended by the plan sponsor at any time without the consent of any person covered thereunder and may be terminated without any liability for benefits accruing after the date of such termination. (f) No Benefit Plan has any provisions that would prohibit the transactions contemplated by this Agreement or give rise to any severance, termination or other payments or liabilities (including without limitation any acceleration in benefits vesting or distribution) as a result of the transactions contemplated by this Agreement. (g) There have been no terminations, partial terminations or discontinuance of contributions to any Benefit Plan intended to qualify under Section 401(a) of the Code without notice to and approval by the Internal Revenue Service and the Pension Benefit Guaranty Corporation. (h) All Benefit Plans and the administration thereof are in substantial compliance with their terms and all applicable provisions of ERISA, the Code and the regulations issued thereunder, as well as with all other applicable federal, state and local statutes, ordinances and regulations. (i) All accrued contribution obligations of the COMPANY with respect to any Benefit Plan have either been fulfilled in their entirety or are fully reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. (j) The COMPANY further represents that it has never had any Benefit Plans subject to Title IV of ERISA. 5.17 Conformity with Law; Litigation. (a) Except as set forth on Schedule 5.17(a) and except with respect to the Environmental Requirements (which are addressed in Section 5.9) and with respect to the Benefit Plans and ERISA and similar laws (which are addressed in Sections 5.15 and 5.16), the COMPANY has complied with all laws, rules, regulations, writs, injunctions, decrees, and orders applicable to it or to the operation of its Business (collectively, "Laws"), except where any such noncompliance would not have a Material Adverse Effect, and has not received any notice of any alleged claim or threatened claim, violation of, liability or potential responsibility under, any such Law which has not heretofore been cured and for which there is no remaining liability other than, in each case, those not having a Material Adverse Effect. (b) Except to the extent set forth on Schedule 5.17(b) (which shall disclose the parties to, nature of, and relief sought for each matter disclosed): (a) There is no suit, action, proceeding, investigation, claim or order pending or, to the COMPANY's knowledge, threatened against either the COMPANY or, to the knowledge of the COMPANY, pending or threatened against any of the officers, directors or employees of the COMPANY with respect to its business or proposed business activities which would have a Material Adverse Effect on the COMPANY, or to which the COMPANY is otherwise a party, before any court, or before any Governmental Authority (collectively, "Claims"). (b) The COMPANY is not subject to any judgment, order or decree of any court or Governmental Authority expressly directed at the COMPANY; the COMPANY has not received any written opinion or memorandum from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may have a Material Adverse Effect. The COMPANY is not engaged in any legal action to recover monies due it or for damages sustained by it. 5.18 Taxes. Except as set forth on Schedule 5.18: (a) All Returns required to have been filed with any Taxing Authority by the COMPANY including any affiliated, combined, consolidated, unitary or similar group of which the COMPANY is or was a member (a "Relevant Group") have been duly filed, and each such Return correctly and completely reflects, in all material respects, the Tax liability and other information required to be reported thereon. All Taxes (whether or not shown on any Return) owed by the COMPANY, any subsidiary and any member of a Relevant Group (individually, the "Acquired Party" and collectively, the "Acquired Parties") have been paid on or prior to the due date for payment of such Taxes, except for Taxes being contested in good faith and by appropriate proceedings (and for which adequate reserves have been established and are being maintained). (b) To the knowledge of the COMPANY and the NAMED STOCKHOLDERS, the provisions for Taxes due by the COMPANY and any subsidiaries (as opposed to any reserve for deferred Taxes established to reflect timing differences between book and Tax income) in the COMPANY Financial Statements are sufficient for all unpaid Taxes, being current taxes not yet due and payable, of such Acquired Party. (c) No Acquired Party is a party to any agreement extending the time within which to file any Return. No claim has ever been made by any Taxing Authority in a jurisdiction in which an Acquired Party does not file Returns that it is or may be subject to taxation by that jurisdiction that is unresolved or if adversely determined would have a Material Adverse Effect on such Acquired Party. (d) Each Acquired Party has withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, creditor, independent contractor or other third party. (e) No Acquired Party has received notice that any Taxing Authority intends to assess any additional Taxes against or in respect of it for any past period. No Acquired Party has received notice that there is a dispute or claim concerning any Tax liability of any Acquired Party either (i) claimed or raised by any Taxing Authority or (ii) otherwise known to any Acquired Party. No Acquired Party has received notice that issues have been raised in any examination by any Taxing Authority with respect to any Acquired Party which, by application of similar principles, reasonably could be expected to result in a proposed deficiency for any other period not so examined. Schedule 5.18 attached hereto lists all federal, state, local and foreign income Tax Returns filed by or with respect to any Acquired Party for all taxable periods ended on or after January 1, 1991, indicates those Returns, if any, that have been audited, and indicates those Returns that currently are the subject of audit. Each Acquired Party has delivered to ITP complete and correct copies of all federal, state, local and foreign income Tax Returns filed by, and all Tax examination reports and statements of deficiencies assessed against or agreed to by, such Acquired Party since January 1, 1991. (f) No Acquired Party has waived any statute of limitations, the waiver of which remains in effect on the date hereof, in respect of Taxes or agreed to any extension of time with respect to any Tax assessment or deficiency. (g) No Acquired Party has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could require it to make any payments, that are not deductible under Section 280G of the Code. (h) No Acquired Party is a party to any Tax allocation or sharing agreement. (i) None of the assets of any Acquired Party constitutes tax- exempt bond financed property or tax-exempt use property, within the meaning of Section 168 of the Code. No Acquired Party is a party to any "safe harbor lease" that is subject to the provisions of Section 168(f)(8) of the Internal Revenue Code as in effect prior to the Tax Reform Act of 1986, or to any "long-term contract" within the meaning of Section 460 of the Code. (j) No Acquired Party is a "consenting corporation" within the meaning of Section 341(f)(1) of the Code, or comparable provisions of any state statutes, and none of the assets of any Acquired Party is subject to an election under Section 341(f) of the Code or comparable provisions of any state statutes. (k) No Acquired Party is a party to any joint venture, partnership or other arrangement that is treated as a partnership for federal income Tax purposes. (l) There are no accounting method changes or proposed or threatened accounting method changes, of any Acquired Party that could give rise to an adjustment under Section 481 of the Code for periods after the Closing Date. (m) No Acquired Party has received any written ruling of a Taxing Authority related to Taxes or entered into any written and legally binding agreement with a Taxing Authority relating to Taxes. (n) Each Acquired Party has disclosed (in accordance with Section 6662(d)(2)(B)(ii) of the Code) on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Section 6662(d) of the Code. (o) No Acquired Party has any liability for Taxes of any person other than such Acquired Party (i) under Section 1.1502-6 of the Treasury regulations (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise. (p) Prior to ITP's acquisition of the COMPANY pursuant to this Agreement, there currently are no limitations on the utilization of the net operating losses, built-in losses, capital losses, Tax credits or other similar items of any Acquired Party (collectively, the "Tax Losses") under (i) Section 382 of the Code, (ii) Section 383 of the Code, (iii) Section 384 of the Code, (iv) Section 269 of the Code, (v) Section 1.1502-15T and Section 1.1502-15A of the Treasury regulations, (vi) Section 1.1502-21T and Section 1.1502-21A of the Treasury regulations or (vii) Sections 1.1502-91T through 1.1502-99 of the Treasury regulations, in each case as in effect both prior to and following the Tax Reform Act of 1986. (q) The fair market value of the assets of the COMPANY as well as the COMPANY's tax basis in such assets exceeds the sum of its liabilities, plus the amount of liabilities, if any, to which the assets are subject. (r) The COMPANY is not under the jurisdiction of a court in a Title 11 or similar case within the meaning of Section 351(e)(2) of the Code. For purposes of this Section 5.18, the following definitions shall apply: "Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a particular Tax with any Taxing Authority or Governmental Authority. "Tax" or "Taxes" means all Federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank shares, withholding, payroll, employment, excise, property, deed, stamp, alternative or add-on minimum or other taxes, assessments, duties, whether disputed or not, together with any interest, penalties, additions to tax or additional amounts with respect thereto. "Taxing Authority" means any Governmental Authority, board, bureau, body, department or authority of any United States federal, state or local jurisdiction or any foreign jurisdiction, having jurisdiction with respect to any Tax. 5.19 No Violations. The COMPANY is not in violation of any Charter Document. To the knowledge of the COMPANY, except as set forth on Schedule 5.19, the execution of this Agreement and the performance by the COMPANY and the NAMED STOCKHOLDERS of their obligations hereunder and the consummation by the COMPANY and the NAMED STOCKHOLDERS of the transactions contemplated hereby will not (i) result in any violation or breach of, or constitute a default under, any of the terms or provisions of the Material Contracts or the Charter Documents or (ii) require the consent, approval, waiver of any acceleration, termination or other right or remedy or action of or by, or make any filing with or give any notice to, any other party, except where the failure to receive any such consent, approval or waiver or to make such filing would not have a Material Adverse Effect. 5.20 Business Conduct. Except as set forth on Schedule 5.20 and except with respect to the negotiations and actions related to and as contemplated by this Agreement, since the Balance Sheet Date, the COMPANY has conducted its business only in the ordinary course consistent with past custom and practices and has incurred no liabilities other than in the ordinary course of business consistent with past custom and practices. Except as forth on Schedule 5.20 and except with respect to the negotiations and actions related to and as contemplated by this Agreement, since the Balance Sheet Date, there has not been any: (a) Material adverse change in the COMPANY's operations, condition (financial or otherwise), operating results, assets, liabilities, employee, customer or supplier relations or business prospects; (b) Loan or advance by the COMPANY to any party other than sales to customers on credit in the ordinary course of business consistent with past custom and practices; (c) Declaration, setting aside, or payment of any dividend or other distribution in respect to the COMPANY's capital stock, any direct or indirect redemption, purchase, or other acquisition of such stock, or the payment of principal or interest on any note, bond, debt instrument or debt to any Affiliate; (d) Incurrence of any Debts, liabilities or obligations except current liabilities incurred in connection with or for services rendered or goods supplied in the ordinary course of business consistent with past custom and practices, liabilities on account of Taxes and governmental charges but not penalties, interest or fines in respect thereof, and obligations or liabilities incurred by virtue of the execution of this Agreement; (e) Issuance by the COMPANY of any notes, bonds, or other debt securities or any equity securities or securities convertible into or exchangeable for any equity securities; (f) Cancellation, waiver or release by the COMPANY of any Debts, rights or claims, except in each case in the ordinary course of business consistent with past custom and practices; (g) Amendment of the COMPANY's Articles or Certificate of Incorporation or By-Laws; (h) Amendment or termination of any Material Contract, other than expiration of such Material Contract in accordance with its terms; (i) Change in accounting principles, methods or practices (including, without limitation, any change in depreciation or amortization policies or rates) utilized by the COMPANY; (j) Sale or assignment by the COMPANY of any tangible assets other than in the ordinary course of business; (k) Capital expenditures or commitments therefor by the COMPANY other than in the ordinary course of business in excess of $10,000 in the aggregate; (l) Liens of any asset of the COMPANY other than Permitted Liens; (m) Adoption, amendment or termination of any Benefit Plan; (n) Increase in the benefits provided under any Benefit Plan, except as provided in such Benefit Plan; or (o) An occurrence or event not included in clauses (a) through (o) that has or might reasonably be expected to have a Material Adverse Effect on the COMPANY. 5.21 Misrepresentation. To the knowledge of the COMPANY and the NAMED STOCKHOLDERS, none of the representations and warranties set forth in this Agreement or the Company Delivered Documents, taken as a whole, contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading. (B) Representations and Warranties of the STOCKHOLDERS. Each STOCKHOLDER severally, and not jointly, represents and warrants that the representations and warranties set forth below are true as of the Closing Date (subject to Section 7.7 hereof). 5.22 Authority; Ownership. Each NAMED STOCKHOLDER has the full legal right, power and authority to enter into this Agreement. Each NAMED STOCKHOLDER owns beneficially and of record all of the shares of the COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and, except as set forth on Schedule 5.22 and except for applicable securities laws, such COMPANY Stock is owned free and clear of any and all Liens, voting trusts and restrictions of every kind. 5.23 No Intention to Dispose of ITP Stock. No NAMED STOCKHOLDER has any current plan or intention, or is under any binding commitment or contract to sell, exchange or otherwise dispose of shares of ITP Stock received pursuant to the Merger. (C) Disclaimer; Disclosure Notwithstanding anything in this Agreement or the COMPANY Delivered Documents to the contrary, the COMPANY and the NAMED STOCKHOLDERS do not make, and have not made, any representations or warranties relating to the COMPANY (or any of its subsidiaries) or the STOCKHOLDERS in connection with the transactions contemplated hereby other than those expressly set forth in this Section 5. It is understood that any cost estimates, projections or other predictions, any data, any financial information or any memoranda or offering materials or presentations (including but not limited to the Confidential Memorandum, dated May 1997, distributed by First of Michigan Corporation) are not and shall not be deemed to be or to include representations or warranties of the COMPANY or the STOCKHOLDERS, except to the extent otherwise expressly covered by the representations and warranties in Section 5 of this Agreement. No Person has been authorized by the COMPANY or the NAMED STOCKHOLDERS to make any representation or warranty relating to the COMPANY (or any of its subsidiaries) or the STOCKHOLDERS in connection with the transactions contemplated hereby other than those expressly set forth in this Section 5 and, if made, such representation or warranty must not be relied upon as having been authorized by the COMPANY or the NAMED STOCKHOLDERS. Any information disclosed in one Annex or Schedule shall be deemed to be disclosed in this Agreement and in all Annexes and Schedules. 6. REPRESENTATIONS OF ITP and NEWCO ITP and NEWCO jointly and severally represent and warrant to the COMPANY and the STOCKHOLDERS that all of the following representations and warranties in this Section 6 are true at the Closing Date (subject to Section 7.7 hereof), and that such representations and warranties shall survive the Closing Date for a period of three years (the "ITP Expiration Date"). 6.1 Due Organization. ITP and NEWCO are each corporations duly incorporated, validly existing and in good standing under the laws of the state of their incorporation, and are duly authorized and qualified to do business under all applicable laws, regulations, ordinances and orders of public authorities to carry on their business in the places and in the manner as now conducted, to own or hold under lease the properties and assets they now own or hold under lease, and to perform all of their obligations under any material agreement to which they are a party by which their properties are bound; are duly qualified in the jurisdictions listed in Schedule 6.1 and there are no other jurisdictions in which the conduct of ITP's and NEWCO's business or activities or their ownership of assets requires any other qualification under applicable law, the absence of which would have a Materially Adverse Effect on either ITP's or NEWCO's business. True, complete and correct copies of the Certificate or Articles of Incorporation and Bylaws, each as amended, of ITP and NEWCO (the "ITP Charter Documents") are all attached hereto as Annex II. The minute books and stock records of each of ITP and NEWCO, as heretofore made available to the COMPANY, are correct and complete in all material respects. 6.2 Authorization. The respective representatives of ITP and NEWCO executing this Agreement have the authority to execute and deliver this Agreement and to bind ITP and NEWCO to perform their respective obligations hereunder. The execution and delivery of this Agreement and the ITP Delivered Documents by ITP and NEWCO and the performance by ITP and NEWCO of their respective obligations under this Agreement and the ITP Delivered Documents and the consummation by ITP and NEWCO of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action by each in accordance with applicable law and the Certificate or Articles of Incorporation and By-Laws of ITP and NEWCO, as the case may be. This Agreement constitutes the valid and binding obligation of ITP and NEWCO, enforceable in accordance with its terms. 6.3 Transaction Not a Breach. Neither the execution and delivery of this Agreement and ITP Delivered Documents nor their performance will violate, conflict with, or result in a breach of any provision of any Law, rule, regulation, order, permit, judgment, injunction, decree or other decision of any court or other tribunal or any Governmental Authority binding on ITP or NEWCO or conflict with or result in the breach of any of the terms, conditions or provisions of the Certificate or Articles of Incorporation or the By-Laws of ITP or NEWCO or of any contract, agreement, mortgage or other instrument or obligation of any nature to which ITP or NEWCO is a party or by which ITP or NEWCO is bound or require the consent, approval, authorization or permit of, or filing with or notification to, any Governmental Authority, any court or tribunal or any other person. 6.4 Misrepresentation. To the knowledge of ITP, none of the representations and warranties set forth in this Agreement or in any of the certificates, schedules, exhibits, lists, documents, exhibits, or other instruments delivered, or to be delivered, to the COMPANY as contemplated by any provision hereof, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 6.5 Capital Stock. The entire authorized capital stock of ITP consists of ten million shares of ITP Stock and two million shares of Preferred Stock. All of the issued and outstanding shares of capital stock of ITP are set forth in Annex V (including the names of the persons who own beneficially five percent (5%) or more of each class of stock). Except as disclosed on Schedule 6.5, there are no outstanding options, rights (preemptive or otherwise), warrants, calls, convertible securities or commitments or any other arrangements (including stock incentive, option and similar plans) to which ITP is a party requiring or restricting issuance, sale or transfer of any equity securities of ITP or any securities convertible directly or indirectly into equity securities of ITP, or evidencing the right to subscribe for any equity securities of ITP, or giving any person any rights with respect to the capital stock of ITP. Except as contemplated by this Agreement or disclosed on Schedule 6.5, there are no voting agreements, voting trusts, other agreements (including cumulative voting rights), commitments or understandings (including repurchase or redemption obligations) with respect to the ITP Stock. Upon the consummation of the Merger contemplated hereby and the issuance and delivery of certificates representing the ITP Stock as provided in this Agreement, the shares of ITP Stock issued pursuant to the Merger will be validly issued, fully paid and non-assessable shares. 6.6 Subsidiaries. Schedule 6.6 attached hereto lists the name of each of ITP's and NEWCO's subsidiaries and sets forth the number and class of the authorized capital stock of each of ITP's and NEWCO's subsidiaries and the number of shares of each of ITP's and NEWCO's subsidiaries which are issued and outstanding prior to the Merger, all of which shares (except as set forth on Schedule 6.6) are duly authorized, validly issued, fully paid and nonassessable and are owned by ITP and NEWCO as the case may be, free and clear of all liens, security interests, pledges, voting trusts, equities, restrictions, encumbrances and claims of every kind. Except as set forth on Schedule 6.6, ITP and NEWCO do not presently own, of record or beneficially, or control, directly or indirectly, any capital stock, securities convertible into capital stock or any other equity interest in any corporation, association or business entity. 6.7 Conformity with Law; Litigation. Except as set forth on Schedule 6.7, ITP and NEWCO have complied with all Laws, applicable to them or to the operation of their businesses and have not received any notice of any alleged claim or threatened claim, violation of, liability or potential responsibility under, any Law which has not heretofore been cured and for which there is no remaining liability other than, in each case, those not having a Material Adverse Effect on the business, condition (financial or other), properties, business prospects or financial results of ITP or NEWCO, taken as a whole. Except to the extent set forth on Schedule 6.7 (which shall disclose to the parties the, nature of, and relief sought for each matter): (a) There is no suit, action, proceeding, investigation, claim or order pending or, to the knowledge of ITP and NEWCO, threatened against either of ITP or NEWCO or, to the knowledge of ITP and NEWCO, pending or threatened against any of the officers, directors or employees of ITP or NEWCO with respect to their businesses or proposed business activities which would have a Material Adverse Effect on ITP or NEWCO, or to which ITP or NEWCO are otherwise a party, before any court, or before any Governmental Authority. (b) ITP and NEWCO are not subject to any judgment, order or decree of any court or Governmental Authority; ITP and NEWCO have not received any opinion or memorandum from legal counsel to the effect that either is exposed, from a legal standpoint, to any liability or disadvantage which may be material to their businesses. Neither ITP nor NEWCO are engaged in any legal action to recover monies due it or them for damages sustained by either of them. 6.8 Financial Statements. ITP has delivered to the COMPANY copies of its Balance Sheets, Income Statements, Statements of Stockholders' Equity, and Statements of Cash Flows at and for the interim period ended October 31, 1997 (collectively the "ITP Financial Statements"). The ITP Financial Statements are consistent with the books and records of ITP (which, in turn, are accurate and complete in all material respects) and fairly present ITP's financial condition, assets and liabilities as of their respective dates and the results of operations and cash flows for the periods related thereto in accordance with GAAP, consistently applied among the periods which are the subject of the ITP Financial Statements, except unaudited interim financial statements which were or are subject to normal year-end adjustments which were not and are not expected to be material in amount and the addition of required footnotes thereto. ITP has not deferred recognition of any of its accounts payable or accelerated recognition of any of its accounts receivable. 6.9 No Undisclosed Liabilities. Except as is disclosed in Schedule 6.9, neither ITP nor any of its subsidiaries has any liabilities required to be disclosed or provided for in a balance sheet (or in the notes thereto) (absolute, accrued, contingent or otherwise), except liabilities (a) adequately provided for in the ITP Financial Statements (including any related notes thereto), (b) incurred in the ordinary course of business and not required under GAAP to be reflected in the ITP Financial Statements, (c) incurred since October 31, 1997 in the ordinary course of business and consistent with past practice, (d) incurred in connection with this Agreement or other merger agreements entered into by ITP and any of its subsidiaries, or (e) which could not reasonably be expected to have a Material Adverse Effect on ITP, its business prospects or its financial condition. 6.10 HSR Act. Neither ITP or NEWCO nor their "ultimate parent entity" as that term is defined in 16 C.F.R. Part 801.1(a)(3) has annual net sales or total assets of $100,000,000 or more, as determined pursuant to 16 C.F.R. Part 801.11. Assuming that neither the COMPANY or the STOCKHOLDERS nor their "ultimate parent entity" as that term is defined in 16 C.F.R. Part 801.1(a)(3) has annual net sales or total assets of $100,000,000 or more, as determined pursuant to 16 C.F.R. Part 801.11, neither ITP or NEWCO nor their "ultimate parent entity is required to file a premerger notification with the Federal Trade Commission or with the Antitrust Division of the United States Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), in connection with the transactions contemplated by this Agreement. 6.11 No Material Adverse Change. Except as set forth on Schedule 6.11 or as stated in the ITP Financial Statements, since October 31, 1997, (a) there has not been any change in ITP's operations, condition (financial or otherwise), operating results, assets, liabilities, employee, customer or supplier relations or business prospects the result of which would have a Material Adverse Effect , (b) any damage to, destruction or loss of any assets of the ITP or its subsidiaries (whether or not covered by insurance) that would have a Material Adverse Effect, (c) any material change by ITP in its accounting methods, principles or practices, (d) any material revaluation by ITP of any of its assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivable other than in the ordinary course of business, (e) any other action or event that would have required the consent of the COMPANY pursuant to Section 7.10 had such action or event occurred after the date of this Agreement, or (f) any sale of a material amount of assets of ITP or any of its subsidiaries except in the ordinary course of business.. 7. COVENANTS PRIOR TO CLOSING 7.1 Access and Cooperation: Due Diligence. (a) Between the date of this Agreement and the Closing Date, after reasonable prior notice, the COMPANY will afford to the officers and authorized representatives of ITP access during business hours to all of the COMPANY's sites, properties, books and records and will furnish ITP with such additional financial and operating data and other information as to the business and properties of the COMPANY as ITP may from time to time reasonably request. The COMPANY will cooperate with ITP and its representatives, including ITP's auditors and counsel, in the preparation of any documents or other material which may be required in connection with the transactions contemplated by this Agreement. ITP, NEWCO, the NAMED STOCKHOLDERS and the COMPANY will treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted as confidential in accordance with the provisions of Section 14 hereof. (b) Between the date of this Agreement and the Closing Date, after reasonable prior notice, ITP will afford to the officers and authorized representatives of the COMPANY and the NAMED STOCKHOLDERS access during business hours and after reasonable prior notice to all of ITP's and NEWCO's sites, properties, books and records and will furnish the COMPANY and the NAMED STOCKHOLDERS with such additional financial and operating data and other information as to the business and properties of ITP and NEWCO as the COMPANY may from time to time reasonably request. ITP and NEWCO will cooperate with the COMPANY and the NAMED STOCKHOLDERS, their representatives, auditors and counsel in the preparation of any documents or other material which may be required in connection with the transactions contemplated by this Agreement. ITP, NEWCO, the NAMED STOCKHOLDERS and the COMPANY will treat all information obtained in connection with the negotiation and performance of this Agreement or the due diligence investigations conducted as confidential in accordance with the provisions of Section 14 hereof. 7.2 Conduct of Business Pending Closing. Between the date of this Agreement and the Closing Date, the COMPANY will, except as set forth on Schedule 7.2: (a) carry on its business in the ordinary course substantially as conducted heretofore and not introduce any new method of management, operation or accounting; (b) maintain its properties and facilities, including those held under leases, in as good working order and condition as at present, ordinary wear and tear excepted; (c) perform in all material respects its obligations under Material Contracts relating to or affecting its assets, properties or rights; (d) keep in full force and effect present insurance policies or other comparable insurance coverage; (e) maintain and preserve its business organization intact and use its best efforts to retain its present key employees and relationships with suppliers, customers and others having business relations with the COMPANY; (f) maintain compliance with all material permits, laws, rules and regulations, consent orders, and all other orders of applicable courts, regulatory agencies and similar Governmental Authorities; (g) maintain present Debt and lease instruments in accordance with their respective terms and not enter into new or amended Debt or lease instruments, provided that Debt and/or lease instruments may be replaced if such replacement instruments are on terms at least as favorable to the COMPANY as the instruments being replaced; and (h) except in the ordinary course of business or as required by law or contractual obligations or other understandings or arrangements existing on the date hereof, the COMPANY will not (i) increase in any manner the base compensation of, or enter into any new bonus or incentive agreement or arrangement with, any of the employees engaged in the COMPANY's business, (ii) pay or agree to pay any additional pension, retirement allowance or other employee benefit to any such employee, whether past or present, (iii) enter into any new employment, severance, consulting, or other compensation agreement with any existing employee engaged in the COMPANY's business, (iv) amend or enter into a new Plan (except as required by Law) or amend or enter into a new collective bargaining agreement (except as required by this Agreement), or (v) engage in any transaction with any Affiliates. 7.3 Prohibited Activities. Except as disclosed on Schedule 7.3 between the date hereof and the Closing Date, the COMPANY will not, without the prior written consent of ITP: (a) make any change in its Articles or Certificate of Incorporation or By-Laws; (b) grant or issue any securities, options, warrants, calls, conversion rights or commitments of any kind relating to its securities of any kind other than in connection with the exercise of options or warrants listed on Schedule 5.3; (c) declare or pay any dividend, or make any distribution in respect of its stock whether now or hereafter outstanding, or purchase, redeem or otherwise acquire or retire for value any shares of its stock or engage in any transaction that will significantly affect the cash reflected on the balance sheet of the COMPANY as of the Balance Sheet Date. (d) enter into any contract or commitment or incur or agree to incur any liability or make any capital expenditure, except if it is in the ordinary course of business (consistent with past practice) or involves an amount not in excess of $10,000; (e) create, assume or permit to exist any Lien upon any assets or properties whether now owned or hereafter acquired, except (1) Permitted Liens, or (2) Liens set forth on Schedule 5.6 hereto; (f) sell, assign, lease or otherwise transfer or dispose of any property or equipment except in the ordinary course of business; (g) negotiate for the acquisition of any business or the start-up of any new business, except in the ordinary course of business or pursuant to the Finders' Fee Agreement; (h) merge or consolidate or agree to merge or consolidate with or into any other corporation; (i) waive any material right or claim of the COMPANY; (j) commit a material breach of, materially amend or terminate any Material Contract; or (k) enter into any other transaction outside the ordinary course of its business or prohibited hereunder. 7.4 No Shop. In consideration of the substantial expenditure of time, effort and expense undertaken by ITP in connection with its due diligence review and the preparation and execution of this Agreement, the COMPANY and the NAMED STOCKHOLDERS agree that neither they nor their representatives, agents or employees will, after the execution of this Agreement until the earlier of (i) the termination of this Agreement or (ii) the Closing, directly or indirectly, solicit, encourage, negotiate or discuss with any third party (including by way of furnishing any information concerning the COMPANY) any acquisition proposal relating to or affecting the COMPANY or any part of it, or any direct or indirect interests in the COMPANY, whether by purchase of assets or stock, purchase of interests, merger or other transaction ("Acquisition Transaction"), and that the COMPANY will promptly advise ITP of the terms of any communications any of the NAMED STOCKHOLDERS or the COMPANY may receive or become aware of relating to any bid for all or any part of the COMPANY. 7.5 Termination of Related Party Agreements. The NAMED STOCKHOLDERS and the COMPANY shall terminate (i) any stockholders' agreements, voting agreements, voting trusts, options, warrants and employment agreements between the COMPANY and any employee and (ii) any existing agreement between the COMPANY and any STOCKHOLDER (except for that certain Real Property Lease between the Company and Church & Church, Inc.), on or prior to the Closing Date. A list of such agreements to be so terminated is set forth on Schedule 7.5 and copies of each such agreement have been provided to counsel for ITP. 7.6 Notification of Certain Matters. The NAMED STOCKHOLDERS and the COMPANY shall give prompt notice to ITP of (i) the occurrence or non- occurrence of any event of which the COMPANY or the NAMED STOCKHOLDERS have knowledge, the occurrence or non-occurrence of which, would cause any representation or warranty of the COMPANY or the NAMED STOCKHOLDERS contained herein to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of any NAMED STOCKHOLDER or the COMPANY to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by such person hereunder. ITP and NEWCO shall give prompt notice to the COMPANY and the NAMED STOCKHOLDERS of (i) the occurrence or nonoccurrence of any event of which ITP or NEWCO have knowledge, the occurrence or non-occurrence of which, would cause any representation or warranty of ITP or NEWCO contained herein to be untrue or inaccurate in any material respect at or prior to the Closing and (ii) any material failure of ITP or NEWCO to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder. The delivery of any notice pursuant to this Section 7.6 shall not be deemed to (i) modify the representations or warranties hereunder of the party delivering such notice, which modification may only be made pursuant to Section 7.7, (ii) modify the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect the remedies available hereunder to the party receiving such notice. 7.7 Amendment of Schedules. (a) Each party hereto agrees that, with respect to the representations and warranties of such party contained in this Agreement, such party shall have the continuing obligation until the Closing Date to supplement or amend promptly the Schedules hereto delivered by such party pursuant to its representation with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules. (b) Notwithstanding the foregoing clause (a), no amendment or supplement to a Schedule prepared by the COMPANY or the NAMED STOCKHOLDERS that constitutes or reflects an event or occurrence that would have a Material Adverse Effect, individually or cumulatively with any other events or occurrences, may be made unless ITP consents in writing to such amendment or supplement; and provided further, that no amendment or supplement to a Schedule prepared by ITP or NEWCO that constitutes or reflects an event or occurrence that would have a Material Adverse Effect may be made unless the COMPANY and the NAMED STOCKHOLDERS consent in writing to such amendment or supplement. In the event that the COMPANY or the NAMED STOCKHOLDERS seek to amend or supplement a Schedule pursuant to this Section 7.7 and ITP does not consent to such amendment or supplement, as provided above, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(a) hereof. In the event that ITP or NEWCO seeks to amend or supplement a Schedule pursuant to this Section 7.7 and the COMPANY and the NAMED STOCKHOLDERS do not consent to such amendment or supplement, as provided above, this Agreement shall be deemed terminated by mutual consent as set forth in Section 12.1(a) hereof. (c) For all purposes of this Agreement, including without limitation for purposes of determining whether the conditions set forth in Sections 8 and 9 have been fulfilled, the Schedules hereto shall be deemed to be the Schedules as amended or supplemented pursuant to this Section 7.7. No party to this Agreement shall be liable to any other party if this Agreement shall be terminated pursuant to the provisions of this Section 7.7, except that, notwithstanding anything to the contrary contained in this Agreement, if the COMPANY or the NAMED STOCKHOLDERS on the one hand, or ITP or NEWCO on the other hand, amends or supplements a Schedule which results in a termination of this Agreement and such amendment or supplement arises out of or reflects facts or circumstances which such party knew about at the time of execution of this Agreement and knew would result in a termination of this Agreement or if such amendment or supplement otherwise is proposed in bad faith, such party shall pay or reimburse ITP or the COMPANY and the STOCKHOLDERS, as the case may be, for all of the legal, accounting and other out of pocket costs reasonably incurred in connection with this Agreement. 7.8 Further Assurances. The parties hereto agree to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other action as may be reasonably necessary or convenient to carry out the transactions contemplated hereby. 7.9 Approval of Merger Agreement. Each of the NAMED STOCKHOLDERS agrees to vote all of his or her shares of the COMPANY Stock in favor of the Merger and all other transactions contemplated by this Agreement. 7.10 Conduct of Business by ITP Pending the Merger.. During the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, ITP covenants and agrees that, unless the COMPANY and the NAMED STOCKHOLDERS shall otherwise agree in writing, ITP shall conduct its business, and cause the businesses of its subsidiaries to be conducted, in the ordinary course consistent with past practice, other than actions taken by ITP or its subsidiaries in contemplation of the Merger or the other transactions contemplated in this Agreement or any other merger agreement entered into by ITP or any of its subsidiaries, and shall not directly or indirectly do, or propose to do, any of the following without the prior written consent of the COMPANY and the NAMED STOCKHOLDERS: (a) amend or otherwise change the Certificate of Incorporation or Bylaws of ITP; or (b) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly owned subsidiary of ITP may declare and pay a dividend to its parent; or (c) take or agree in writing or otherwise to take any action which would make any of the representations or warranties of ITP contained in this Agreement untrue or incorrect or prevent ITP from performing or cause ITP not to perform its covenants hereunder. 8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NAMED STOCKHOLDERS AND THE COMPANY The obligations of the NAMED STOCKHOLDERS and the COMPANY with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of all of the conditions set forth in this Section 8. 8.1 Representations and Warranties. All representations and warranties of ITP and NEWCO contained in Section 6 shall be true and correct in all material respects as of the Closing Date as though such representations and warranties had been made as of such date; and a certificate to the foregoing effect dated the Closing Date and signed by the President or any Vice President of ITP shall have been delivered to the COMPANY and the NAMED STOCKHOLDERS. 8.2 Performance of Obligations. All of the terms, covenants and conditions of this Agreement to be complied with and performed by ITP and NEWCO on or before the Closing Date shall have been duly complied with and performed in all material respects on or before the Closing Date, provided that non-performance of an obligation at any time shall not constitute a failure of the condition contained in this Section 8.2 if such non-performance is not a material breach of such obligation; and certificates to the foregoing effect dated the Closing Date and signed by the President or any Vice President of ITP shall have been delivered to the COMPANY and the NAMED STOCKHOLDERS. 8.3 No Litigation. No action or proceeding before a court or any other Governmental Authority or body shall have been instituted or threatened to restrain or prohibit the Merger or the transactions contemplated by this Agreement. 8.4 Opinion of Counsel. The COMPANY and the NAMED STOCKHOLDERS shall have received an opinion from counsel for ITP and NEWCO, dated the Closing Date, substantially in the form annexed hereto as Annex VI. 8.5 Consents and Approvals. All material consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by ITP and NEWCO for the authorization, execution and delivery of this Agreement and the performance and consummation by them of the transactions contemplated hereby shall have been obtained and made, except where the failure to receive such consents, etc. could not reasonably be expected to have a Material Adverse Effect on ITP. 8.6 Good Standing Certificates. ITP and NEWCO each shall have delivered to the COMPANY a certificate, dated as of a date no earlier than 10 days prior to the Closing Date, duly issued by the Delaware Secretary of State and in each state in which ITP or NEWCO is authorized to do business, showing that each of ITP and NEWCO is in good standing and authorized to do business and that all state franchise and/or income tax returns and taxes for ITP and NEWCO, respectively, for all periods prior to the Closing have been filed and paid. 8.7 Secretary's Certificate. The COMPANY and the NAMED STOCKHOLDERS shall have received a certificate or certificates, dated the Closing Date and signed by the secretary of ITP and of NEWCO, certifying the truth and correctness of attached copies of the ITP's and NEWCO's respective Certificates of Incorporation (including amendments thereto), By-Laws (including amendments thereto), and resolutions of the boards of directors and, if required, the stockholders of ITP and NEWCO approving ITP's and NEWCO's entering into this Agreement and the performance and consummation of the transactions contemplated hereby. 8.8 No Material Adverse Change. As of the Closing Date, no event or circumstance shall have occurred with respect to ITP or NEWCO which would constitute a Material Adverse Effect, and neither ITP nor the NEWCO shall have suffered any material loss or damages to any of its properties or assets whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of each of ITP and NEWCO to conduct its business. 8.9 Employment Agreements. NEWCO shall have entered into an employment agreement with each of John D. Bamberger, Michael J. Baltosiewich and Alan Wise substantially in the form attached as Annex VIII hereto. 9. CONDITIONS PRECEDENT TO OBLIGATIONS OF ITP AND NEWCO The obligations of ITP and NEWCO with respect to actions to be taken on the Closing Date are subject to the satisfaction or waiver on or prior to the Closing Date of all of the conditions set forth in this Section 9. 9.1 Representations and Warranties. All the representations and warranties of the NAMED STOCKHOLDERS and the COMPANY contained in this Agreement shall be true and correct in all material respects as of the Closing Date with the same effect as though such representations and warranties had been made on and as of such date; and the NAMED STOCKHOLDERS shall have delivered to ITP certificates dated the Closing Date and signed by them to such effect. 9.2 Performance of Obligations. All of the terms, covenants and conditions of this Agreement to be complied with or performed by the NAMED STOCKHOLDERS and the COMPANY on or before the Closing Date shall have been duly performed or complied with in all material respects on or before the Closing Date, as the case may be, provided that non-performance of an obligation at any time shall not constitute a failure of the condition contained in this Section 9.2 if such non-performance is not a material breach of such obligation; and the NAMED STOCKHOLDERS shall have delivered to ITP certificates dated the Closing Date and signed by them to such effect. 9.3 No Litigation. No action or proceeding before a court or any other Governmental Authority or body shall have been instituted or threatened to restrain or prohibit the Merger or the transactions contemplated by this Agreement and no Governmental Authority or body shall have taken any other action or made any request of ITP as a result of which the management of ITP deems it inadvisable to proceed with the transactions hereunder. 9.4 Secretary's Certificate. ITP shall have received a certificate or certificates, dated the Closing Date and signed by the secretary of the COMPANY, certifying the truth and correctness of attached copies of the COMPANY's Certificate or Articles of Incorporation (including amendments thereto), By-Laws (including amendments thereto), and resolutions of the board of directors and the shareholders approving the COMPANY's entering into this Agreement and the consummation of the transactions contemplated hereby. 9.5 No Material Adverse Change. As of the Closing Date, no event or circumstance shall have occurred with respect to the COMPANY which would constitute a Material Adverse Effect, and the COMPANY shall not have suffered any material loss or damages to any of its properties or assets whether or not covered by insurance, which change, loss or damage materially affects or impairs the ability of the COMPANY to conduct its business. 9.6 STOCKHOLDERS' Release. The NAMED STOCKHOLDERS shall have delivered to ITP an instrument dated the Closing Date releasing the COMPANY from any and all (i) claims of the STOCKHOLDERS against the COMPANY and ITP and (ii) obligations of the COMPANY and ITP to the NAMED STOCKHOLDERS, except for (x) continuing obligations to the NAMED STOCKHOLDERS relating to their employment by the COMPANY, (y) obligations arising under this Agreement or the transactions contemplated hereby. 9.7 Termination of Related Party Agreements. All agreements specified in Section 7.5 hereof to be terminated prior to or as of the Closing Date shall have been terminated effective prior to or as of the Closing Date. 9.8 Opinion of Counsel. ITP shall have received an opinion from counsel to the COMPANY, dated the Closing Date, substantially in the form attached hereto as Annex VII. 9.9 Consents and Approvals. All material consents, waivers, approvals, authorizations or orders required to be obtained, and all filings required to be made, by the COMPANY and the NAMED STOCKHOLDERS for the authorization, execution and delivery of this Agreement and the performance and consummation by them of the transactions contemplated hereby shall have been obtained and made, except where the failure to receive such consents, etc. could not reasonably be expected to have a Material Adverse Effect on the COMPANY. 9.10 Good Standing Certificates. The COMPANY shall have delivered to ITP a certificate, dated as of a date no earlier than five days prior to the Closing Date, duly issued by the appropriate Governmental Authority in the COMPANY's state of incorporation and, unless waived by ITP, in each state in which the COMPANY is authorized to do business, showing the COMPANY is in good standing and authorized to do business. In addition, the COMPANY shall have delivered to ITP a letter from the Michigan Department of Treasury confirming that all tax returns and taxes relating to Michigan Sales, Use and Withholding Taxes and Michigan Single Business Taxes for all periods prior to December 15, 1997 have been filed and paid. 9.11 Employment Agreements. Each of John D. Bamberger, Michael J. Baltosiewich and Alan Wise shall have entered into an employment agreement substantially in the form attached as Annex VIII hereto. 9.12 Stockholders' Agreement. Each STOCKHOLDER shall have executed a Joinder Agreement substantially in the form of Annex IX hereto binding them and all of their shares of ITP Stock received in the Merger to the provisions of the Stockholders' Agreement of IT Partners, Inc. dated May 30, 1997, as amended to date, a true, correct and complete copy of which has been provided to the COMPANY for distribution to the STOCKHOLDERS (the "Stockholders' Agreement"). 9.13 Subordination Agreement. Each of Messrs. John Bamberger and Alan Wise, being the only STOCKHOLDERS to receive Notes shall have executed a Subordination Agreement substantially in the form of Annex X hereto. 9.14 Financing. ITP and/or NEWCO, as the case may be, shall have secured adequate financing to fund the amount of cash set forth on Annex III under the Intercompany Loan and Security Agreement by and among ITP, NEWCO, the lenders from time to time, Creditanstalt-Bankverein and Creditanstalt Corporate Finance, Inc. (the "Agent"). 9.15 Letter Agreement. Each of the STOCKHOLDERS who are not NAMED STOCKHOLDERS shall have executed a Letter Agreement in the form attached hereto as Annex XIII setting forth certain representations, warranties, covenants and agreements. 9.16 Employment Matters. The COMPANY shall have terminated any agreement with Manage Pro, Inc. pursuant to which the COMPANY leases employees. Further, the COMPANY shall, in the ordinary course following the termination of such agreement, re-hire all employees previously leased from Manage Pro, Inc. 10. COVENANTS AFTER CLOSING 10.1 Preparation and Filing of Tax Returns. (a) The NAMED STOCKHOLDERS shall prepare draft Returns of any Acquired Party for all taxable periods that end on or before the Closing Date and NEWCO shall file or cause to be filed (after review and approval of such Returns by the NAMED STOCKHOLDERS) all such Returns on or before the due dates of such Returns. (b) ITP shall file or cause to be filed all Returns of, or that include, any Acquired Party for all taxable periods ending after the Closing Date on or before the due dates of such Returns. (c) Each party hereto shall, and shall cause its subsidiaries and Affiliates to, provide to each of the other parties hereto such cooperation and information as any of them reasonably may request in filing any Return, amended Return or claim for refund, determining a liability for Taxes or a right to refund of Taxes or in conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of all relevant portions of relevant Returns, together with relevant accompanying schedules and relevant work papers, relevant documents relating to rulings or other determinations by Taxing Authorities and relevant records concerning the ownership and Tax basis of property, which such party may possess. Each party shall make its employees reasonably available on a mutually convenient basis at its cost to provide explanation of any documents or information so provided. Subject to the preceding sentence, each party required to file Returns pursuant to this Agreement shall bear all costs of filing such Returns. (d) Each of the COMPANY, NEWCO, ITP and each NAMED STOCKHOLDER hereby agrees to report the transaction as a tax free reorganization pursuant to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code and hereby agrees not to take any position which is inconsistent with the foregoing, including, without limitation, any election under Section 338 of the Code. 10.2 Stock Options Subject to the provisions of the Stockholders' Agreement referred to in Section 9.12 hereof, ITP covenants and agrees that a stock option plan valued at the post-closing share price equivalent in value to 6% of the stock portion of the Merger Consideration will be implemented for the COMPANY'S employees. ITP's Board of Directors will consider the recommendations of Messrs. John Bamberger, Alan Wise and Michael Baltosiewich with regard to the employees who should receive such options. 10.3 Annual Incentive Compensation Plan ITP shall implement an annual incentive compensation plan (the "Annual Incentive Compensation Plan") for the employees of NEWCO, the terms of which shall be mutually agreed upon by the parties. In connection with the Annual Incentive Compensation Plan, ITP shall allocate the compensation of Messrs. John Bamberger, Alan Wise and Michael Baltosiewich between ITP and NEWCO in a manner reflecting the allocation of such individuals' time between ITP and NEWCO. The benefits to be awarded under the Annual Incentive Compensation Plan shall be allocated to the employees of NEWCO in the manner determined by Messrs. John Bamberger, Alan Wise and Michael Baltosiewich from time to time. 11. INDEMNIFICATION The NAMED STOCKHOLDERS, ITP and NEWCO each make the following covenants that are applicable to them, respectively: 11.1 General Indemnification by the STOCKHOLDERS. John D. Bamberger and Alan E. Wise covenant and agree that they, jointly and severally, and the other NAMED STOCKHOLDERS covenant and agree that they severally, but not jointly, will indemnify, defend, protect and hold harmless ITP, NEWCO, the COMPANY and the Surviving Corporation at all times, from and after the date of this Agreement until the Expiration Date, from and against all claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and reasonable expenses of investigation) incurred by ITP, NEWCO, the COMPANY or the Surviving Corporation as a result of or arising from (i) any breach of the representations and warranties of the NAMED STOCKHOLDERS or the COMPANY set forth herein or in the Company Delivered Documents, (ii) any breach of any agreement on the part of the NAMED STOCKHOLDERS or the COMPANY under this Agreement or the Company Delivered Documents, (iii) any liability under any Federal or state law or regulation, at common law or otherwise with respect to the transactions contemplated in this Agreement, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to the COMPANY or the NAMED STOCKHOLDERS, or arising out of or based upon any omission or alleged omission by the COMPANY and/or the NAMED STOCKHOLDERS to state a material fact relating to the COMPANY or the NAMED STOCKHOLDERS required to be stated or necessary to make the statements not misleading, (iv) any Tax imposed upon the COMPANY, NEWCO or the Surviving Corporation or relating to any third party or Acquired Party for any period ending on or prior to the Closing Date, including, in each case, any such Tax arising out of or in connection with the transactions effected pursuant to this Agreement or any such Tax for which an Acquired Party may be liable under Section 1.1502-6 of the Treasury Regulations (or any similar provisions of state, local or foreign law), as a transferee or successor, by contract or otherwise (in excess of all amounts already paid with respect thereto or properly accrued or reserved with respect thereto on the COMPANY Financial Statements, the Estimated Closing Date Balance Sheet, the Final Closing Balance Sheet and any other financial statements of the COMPANY delivered to ITP with respect to periods ending on or prior to the Closing Date); provided, however, that any Tax arising out of or in connection with (a) the transactions effected pursuant to this Agreement solely as a result of the unilateral action of ITP after the Closing Date, and (b) any gain recognized by NEWCO in the event NEWCO (and not ITP) is deemed to have transferred the ITP Stock to the STOCKHOLDERS and if the transactions effected pursuant to this Agreement fail to qualify as a tax free reorganization pursuant to Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code shall not, in the case of either (a) or (b), give rise to indemnification under this Section 11.1, or (v) any liability (in excess of the collateral) arising in connection with the leases listed on Schedule 5.11(b)(g)(ii), including any assignment or financing document associated with such leases; provided, however, the indemnity provided in this Section 11.1(v) shall not be subject to the limitation on indemnification set forth in Section 11.5(a). 11.2 Indemnification by ITP. ITP covenants and agrees that it will indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from and after the date of this Agreement until the ITP Expiration Date, from and against all claims, damages, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys' fees and expenses of investigation) incurred by the STOCKHOLDERS as a result of or arising from (i) any breach by ITP or NEWCO of its representations and warranties set forth herein or in the ITP Delivered Documents, (ii) any breach of any agreement on the part of ITP or NEWCO under this Agreement or the ITP Delivered Documents, or (iii) any liability under any Federal or state law or regulation, at common law or otherwise with respect to the transactions contemplated in this Agreement, arising out of or based upon any untrue statement or alleged untrue statement of a material fact relating to ITP or NEWCO, or arising out of or based upon any omission or alleged omission to state a material fact relating to ITP or NEWCO required to be stated or necessary to make the statements not misleading, or (iv) with respect to any Tax arising out of or in connection with the transactions effected pursuant to this Agreement caused solely as a result of the unilateral action of ITP after the Closing Date. 11.3 Third Person Claims. Promptly after any party hereto (hereinafter the "Indemnified Party") has received notice of or has knowledge of any claim by a person not a party to this Agreement ("Third Person"), of the commencement of any action or proceeding by a Third Person, the Indemnified Party shall, as a condition precedent to a claim with respect thereto being made against any party obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter the "Indemnifying Party"), give the Indemnifying Party written notice of such claim or the commencement of such action or proceeding. Such notice shall state the nature and the basis of such claim and a reasonable estimate of the amount thereof. The Indemnifying Party shall have the right to defend and settle, at its own expense and by its own counsel, any such matter so long as the Indemnifying Party pursues the same in good faith and diligently, provided that the Indemnifying Party shall not settle any criminal proceeding without the written consent of the Indemnified Party, such consent not to be unreasonably withheld or delayed. If the Indemnifying Party undertakes to defend or settle, it shall promptly notify the Indemnified Party of its intention to do so, and the Indemnified Party shall cooperate, at the Indemnifying Party's expense, with the Indemnifying Party and its counsel in the defense thereof and in any settlement thereof. If the Indemnifying Party desires to accept a final and complete settlement of any such Third Person claim and the Indemnified Party refuses to consent to such settlement, then the Indemnifying Party's liability under this Section with respect to such Third Person claim shall be limited to the amount so offered in settlement to said Third Person plus all indemnifiable costs and expenses incurred to date, the Indemnifying Party shall be relieved of its duty to defend and shall tender the Third Person claim back to the Indemnified Party, who shall thereafter, at its own expense, be responsible for the defense and negotiation of such Third Person claim. If the Indemnifying Party does not undertake to defend such matter to which the Indemnified Party is entitled to indemnification hereunder, or fails diligently to pursue such defense, the Indemnified Party may undertake such defense through counsel of its choice, at the cost and expense of the Indemnifying Party, and the Indemnified Party may settle such matter, and the Indemnifying Party shall reimburse the Indemnified Party for the amount paid in such settlement and any other liabilities or expenses incurred by the Indemnified Party in connection therewith, provided, however, that under no circumstances shall the Indemnified Party settle any Third Person claim without the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. 11.4 Exclusive Remedy. The indemnification provided for in this Section 11 shall (except as prohibited by ERISA and except as otherwise expressly provided in this Agreement, the Company Delivered Documents or the ITP Delivered Documents) be the exclusive remedy in any action seeking damages or any other form of monetary relief brought by any party to this Agreement against another party. 11.5 Limitations on Indemnification. (a) The persons or entities indemnified pursuant to Section 11.1 or 11.2 shall not assert any claim other than a Third Person claim for indemnification hereunder until such time as, and solely to the extent that, the aggregate of all claims which such persons may have shall exceed $150,000. An amount equal to $150,000 shall be a cumulative deductible against any claim for indemnification hereunder. No person shall be entitled to indemnification under this Article 11 if and to the extent that such person's claim for indemnification is directly or indirectly related to a breach by such person of any representation, warranty, covenant or other agreement set forth in this Agreement. (b) ITP shall have the right, upon reasonable prior written notice, to offset indemnification amounts due to it by a NAMED STOCKHOLDER pursuant to this Agreement against payments due to such NAMED STOCKHOLDER under (i) this Agreement (including, without limitation, the consideration set forth on Annex III hereto) and/or (ii) any contract contemplated by, or referred to in, this Agreement. (c) Except for claims for Merger Consideration, the indemnification obligations under Section 11.1 shall be limited, in the aggregate, to fifty percent (50%) of the value of the Merger Consideration as of the Closing Date received by the STOCKHOLDERS pursuant to Article 3. The indemnification obligations under Section 11.2 shall be limited, in the aggregate, to fifty percent (50%) of the total value of the Merger Consideration as of the Closing Date paid by ITP pursuant to Article 3. 11.6 Subrogation. In the event that the Indemnifying Party shall be obligated to provide indemnification hereunder to a claimant (the "Claimant"), the Indemnifying Party shall, upon payment of such indemnity in full, be subrogated to all rights of the Claimant with respect to the Losses to which such indemnification relates. 11.7 Tax and Insurance. All indemnification or reimbursement payments required pursuant to this Agreement shall be made net of all tax and insurance benefits actually received by the Indemnified Party. In the event that any claim for indemnification asserted hereunder is, or may be, the subject of any insurance coverage or other right to indemnification or contribution from any third person, the Indemnified Party(ies) expressly agree that he (they) shall promptly notify the applicable insurance carrier of any such claim or loss and tender defense thereof to such carrier, and shall also promptly notify any potential third party indemnitor or contributor which may be liable for any portion of such losses or claims. The Indemnified Party(ies) agree to pursue, at the cost and expense of the Indemnified Party, such claims diligently and to reasonably cooperate, at the cost and expense of the Indemnified Party, with each applicable insurance carrier and third party indemnitor or contributor. 11.8 Undertakings. Prior to the assertion of any claims for indemnification under this Agreement, the Indemnified Party shall utilize all reasonable efforts, consistent with normal practices and policies and good commercial practice, to mitigate any losses or damages subject to indemnification hereunder. 12. TERMINATION OF AGREEMENT 12.1 Termination. This Agreement may be terminated at any time prior to the Closing Date solely: (a) by mutual consent of the boards of directors of ITP and the COMPANY; (b) by the NAMED STOCKHOLDERS or the COMPANY (acting through its board of directors), on the one hand, or by ITP (acting through its board of directors), on the other hand, if the transactions contemplated by this Agreement to take place at the Closing shall not have been consummated by January 31, 1998, unless the failure of such transactions to be consummated is due to the willful failure of the party seeking to terminate this Agreement to perform any of its obligations under this Agreement to the extent required to be performed by it prior to or on the Closing Date; (c) by the STOCKHOLDERS or the COMPANY, on the one hand, or by ITP, on the other hand, if a material breach or default shall be made by the other party in the observance or in the due and timely performance of any of the covenants, agreements or conditions contained herein, and the curing of such default shall not have been made on or before the Closing Date; or (d) pursuant to Section 7.7 hereof. 12.2 Liabilities in Event of Termination. Except as provided in Section 7.7 hereof, the termination of this Agreement will in no way limit any obligation or liability of any party based on or arising from a breach or default by such party with respect to any of its representations, warranties, covenants or agreements contained in this Agreement including, but not limited to, legal and audit costs and out of pocket expenses. 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION 13.1 STOCKHOLDERS. The NAMED STOCKHOLDERS recognize and acknowledge that they had in the past, currently have, and in the future may have, access to certain confidential information of the COMPANY and/or ITP, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's and/or ITP's respective businesses (collectively, the "Confidential Information"). The NAMED STOCKHOLDERS, severally and not jointly, agree that they will not disclose such Confidential Information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except (a) to authorized representatives of ITP who need to know such Confidential Information in connection with the transactions contemplated hereby, who have been informed of the confidential nature of such Confidential Information and who have agreed to keep such Confidential Information confidential as provided hereby, (b) following the Closing, such Confidential Information may be disclosed by the NAMED STOCKHOLDERS as is required in the course of performing their duties for ITP or the Surviving Corporation and (c) to counsel and other advisers, provided that such advisers (other than counsel) agree to the confidentiality provisions of this Section 13.1, unless (i) such Confidential Information becomes known to the public generally through no fault of any such NAMED STOCKHOLDERS, (ii) disclosure is required by law or the order of any Governmental Authority under color of law, provided, that prior to disclosing any Confidential Information pursuant to this clause (ii), the NAMED STOCKHOLDERS shall, if possible, give prior written notice thereof to ITP and provide ITP with the opportunity to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by any of the NAMED STOCKHOLDERS of the provisions of this Section 13, ITP shall be entitled to an injunction restraining such NAMED STOCKHOLDERS from disclosing, in whole or in part, such Confidential Information. Nothing herein shall be construed as prohibiting ITP from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. In the event the transactions contemplated by this Agreement are not consummated, the NAMED STOCKHOLDERS shall have none of the above-mentioned restrictions on their ability to disseminate Confidential Information with respect to the COMPANY. 13.2 ITP and NEWCO. ITP and NEWCO recognize and acknowledge that they had in the past, currently have, and in the future may have, access to certain Confidential Information of the COMPANY, such as operational policies, and pricing and cost policies that are valuable, special and unique assets of the COMPANY's business. ITP and NEWCO agree that, prior to the Closing, or if the transactions contemplated by this Agreement are not consummated, they will not disclose such Confidential Information to any person, firm, corporation, association or other entity for any purpose or reason whatsoever, except (a) to the NAMED STOCKHOLDERS and to-authorized representatives of the COMPANY, and (b) to counsel, the Agent and the Lenders and other advisers, provided that such advisors (other than counsel) agree to the confidentiality provisions of this Section 13.2, unless (i) such Confidential Information becomes known to the public generally through no fault of ITP or NEWCO, (ii) disclosure is required by law or the order of any Governmental Authority under color of law, provided, that prior to disclosing any Confidential Information pursuant to this clause (ii), ITP and NEWCO shall, if possible, give prior written notice thereof to the COMPANY and the NAMED STOCKHOLDERS and provide the COMPANY and the NAMED STOCKHOLDERS with the opportunity to contest such disclosure, or (iii) the disclosing party reasonably believes that such disclosure is required in connection with the defense of a lawsuit against the disclosing party. In the event of a breach or threatened breach by ITP or NEWCO of the provisions of this Section, the COMPANY and the NAMED STOCKHOLDERS shall be entitled to an injunction restraining ITP and NEWCO from disclosing, in whole or in part, such confidential information. Nothing herein shall be construed as prohibiting the COMPANY and the NAMED STOCKHOLDERS from pursuing any other available remedy for such breach or threatened breach, including the recovery of damages. 13.3 Damages. Because of the difficulty of measuring economic losses as a result of the breach of the foregoing covenants in Sections 13.1 and 13.2, and because of the immediate and irreparable damage that would be caused for which they would have no other adequate remedy, the parties hereto agree that, in the event of a breach by any of them of the foregoing covenants, the covenant may be enforced against the other parties by injunctions and restraining orders. 13.4 Survival. The obligations of the parties under this Article 13 shall survive the termination of this Agreement for a period of three (3) years from the Closing Date. 14. STOCKHOLDERS' AGREEMENT 14.1 Stockholders' Agreement. Each of the STOCKHOLDERS shall have executed a Joinder Agreement substantially in the form of Annex IX hereto binding them and all of their shares of ITP Stock received in the Merger to the provisions of the Stockholders' Agreement. The certificates evidencing the ITP Stock delivered to the STOCKHOLDERS pursuant to Section 3 of this Agreement will bear a legend substantially in the form set forth below and containing such other information as ITP may deem necessary or appropriate: EXCEPT AS PROVIDED BY THAT CERTAIN STOCKHOLDERS' AGREEMENT DATED MAY 30, 1997, AS AMENDED, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY FOR INSPECTION, THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION. 15. FEDERAL SECURITIES ACT REPRESENTATIONS The NAMED STOCKHOLDERS acknowledge that the shares of ITP Stock to be delivered to the NAMED STOCKHOLDERS pursuant to this Agreement have not been and will not be registered under the Act and therefore may not be resold without compliance with the 1933 Act. The ITP Stock to be acquired by the NAMED STOCKHOLDERS pursuant to this Agreement is being acquired solely for their own respective accounts, for investment purposes only, and with no present intention of distributing, selling or otherwise disposing of it in connection with a distribution. 15.1 Compliance with Law. The NAMED STOCKHOLDERS covenant, warrant and represent that none of the shares of ITP Stock issued to the NAMED STOCKHOLDERS will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise disposed of except after fall compliance with all of the applicable provisions of the 1933 Act and the rules and regulations of the SEC. All the ITP Stock shall bear the following legend in addition to the legend required under Article 14 of this Agreement: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND, IF REQUIRED BY IT PARTNERS, INC., AN OPINION OF COUNSEL TO IT PARTNERS, INC. STATING THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT. 15.2 Economic Risk: Sophistication. The NAMED STOCKHOLDERS represent and warrant that they are able to bear the economic risk of an investment in the ITP Stock acquired pursuant to this Agreement, can afford to sustain a total loss of such investment and have such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of the proposed investment in the ITP Stock. The NAMED STOCKHOLDERS represent and warrant that they have had an adequate opportunity to ask questions and receive answers from the officers of ITP concerning any and all matters relating to the transactions described herein including, without limitation, the background and experience of the current and proposed officers and directors of ITP, business, operations, financial conditions and plans for ITP, and any plans for additional acquisitions and the like. Each NAMED STOCKHOLDER represents that after taking into consideration the information and advice provided herein each NAMED STOCKHOLDER has the requisite knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of this investment. Notwithstanding the foregoing, the NAMED STOCKHOLDERS have the right to rely fully upon each of the representations, warranties, covenants and agreements of ITP and NEWCO contained in this Agreement, the Company Delivered Documents and the ITP Delivered Documents. 16. GENERAL 16.1 Cooperation. The COMPANY, the NAMED STOCKHOLDERS, ITP and NEWCO, shall each deliver or cause to be delivered to the other on the Closing Date, and at such other times and places as shall be reasonably agreed to, such additional instruments as the other may reasonably request for the purpose of carrying out this Agreement. The NAMED STOCKHOLDERS will, at ITP's expense, cooperate and use their reasonable efforts to have the present officers, directors and employees of the COMPANY cooperate with ITP on and after the Closing Date in furnishing information, evidence, testimony and other assistance in connection with any Tax Return filing obligations, actions, proceedings, arrangements or disputes of any nature with respect to matters pertaining to all periods prior to the Closing Date. 16.2 Successors and Assigns. Except that ITP and the Surviving Corporation may assign the benefits of this Agreement to the Agent, this Agreement and the rights and obligations of the parties hereunder (including, but not limited to, the right to receive the Subsequent Merger Consideration) may not be assigned (except by operation of law) and shall be binding upon and shall inure to the benefit of the parties hereto, the permitted successors of ITP, and the heirs and legal representatives of the NAMED STOCKHOLDERS. 16.3 Entire Agreement. This Agreement (including the Schedules, exhibits and annexes attached hereto), the Company Delivered Documents and the ITP Delivered Documents constitute the entire agreement and understanding among the NAMED STOCKHOLDERS, the COMPANY, NEWCO and ITP and supersede any prior agreement and understanding relating to the subject matter of this Agreement. Subject to Section 16.14, this Agreement may be modified or amended only by a written instrument executed by the NAMED STOCKHOLDERS, the COMPANY, NEWCO and ITP, acting through their respective officers or trustees, duly authorized by their respective boards of directors (as the case may be). Any disclosure made on any Schedule delivered pursuant hereto shall be deemed to have been disclosed for purposes of any other Schedule required hereby, provided that the COMPANY and the NAMED STOCKHOLDERS, on the one hand, and ITP and NEWCO, on the other hand, shall make a good faith effort to cross reference disclosure, as necessary or advisable, between related Schedules. 16.4 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute but one and the same instrument. 16.5 Brokers and Agents. ITP and NEWCO represent and warrant that they employed no broker or agent in connection with this transaction. It is acknowledged and understood that the COMPANY and the NAMED STOCKHOLDERS retained the services of First of Michigan Corporation and the STOCKHOLDERS will be solely responsible for any fees, commissions or expenses of that entity. 16.6 Expenses. (a) Except as otherwise expressly provided in this Agreement, whether or not the transactions herein contemplated shall be consummated, each of the parties hereto will pay its own fees, expenses and disbursements and those of its agents, representatives, accountants and counsel incurred in connection with the subject matter of this Agreement and any amendments thereto, including all costs and expenses incurred in the performance and compliance with all conditions to be performed by it under this Agreement. (b) Each NAMED STOCKHOLDER shall pay all sales, use, transfer, real property transfer, recording, gains, stock transfer and other similar taxes and fees ("Transfer Taxes") imposed in connection with the transactions contemplated hereby. Each NAMED STOCKHOLDER shall file all necessary documentation and Returns with respect to such Transfer Taxes. In addition, each NAMED STOCKHOLDER acknowledges that he, and not the COMPANY or ITP, will pay all Taxes attributable to the receipt of the Merger Consideration payable pursuant to Section 2 hereof, and will assume all Tax risks and liabilities of such NAMED STOCKHOLDER in connection with the transactions contemplated hereby. 16.7 Notices. All notices or communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given (i) if physically delivered, (ii) if telephonically transmitted by facsimile transmission, if such transmission is confirmed by delivery by certified or registered United States Mail (with first class postage pre-paid) or guaranteed overnight delivery, (iii) five business days after having been deposited in the United States Mail, as certified or registered mail (with return receipt requested and with first class postage pre-paid), or (iv) one (1) business day after having been transmitted to a third party providing delivery services in the ordinary course of business which guarantees delivery on the next business day after such transmittal (e.g., via Federal Express), all of which notices or other communications shall be addressed to the recipient (or to an officer or agent of the recipient) as follows: (a) If to ITP, or NEWCO, addressed to them at: IT Partners, Inc. 9881 Broken Land Parkway, Suite 102 Columbia, Maryland 21046 Attn: Mr. Daniel J. Klein with copies to: Piper & Marbury L.L.P. Charles Center South 36 South Charles Street Baltimore, Maryland 21201 Attn: Earl S. Wellschlager, Esquire (b) If to the NAMED STOCKHOLDERS, addressed to them at their addresses set forth on Annex IV, with copies to such counsel, if any, as is set forth with respect to each NAMED STOCKHOLDER on such Annex IV; (c) If to the COMPANY, addressed to it at: Sequoia Diversified Products, Inc. 107 South Squirrel Road Auburn Hills, Michigan 48326 Attn: Mr. John D. Bamberger with copies to: Dykema Gossett PLLC 400 Renaissance Center Detriot, Michigan 48243-1688 Attn: J. Michael Bernard, Esquire or to such other address or counsel as any party hereto shall specify pursuant to this Section 16.7 from time to time. 16.8 Governing Law. This Agreement shall be construed in accordance with the laws of the State of Maryland, except that matters herein within the purview of the matters covered by Delaware Law or by Michigan Law shall be governed by such Delaware Law or Michigan Law (as the case may be), in each case without reference to conflicts of laws principles. 16.9 Exercise of Rights and Remedies. Except as otherwise provided herein, no delay of or omission in the exercise of any right, power or remedy accruing to any party as a result of any breach or default by any other party under this Agreement shall impair any such right, power or remedy, nor shall it be construed as a waiver of or acquiescence in any such breach or default, or of any similar breach or default occurring later; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default occurring before or after that waiver. 16.10 Time. Time is of the essence with respect to this Agreement. 16.11 Reformation and Severability. In case any provision of this Agreement shall be invalid, illegal or unenforceable, it shall, to the extent possible, be modified in such manner as to be valid, legal and enforceable but so as to most nearly retain the intent of the parties, and if such modification is not possible, such provision shall be severed from this Agreement, and in either case the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby. 16.12 Remedies Cumulative. No right, remedy or election given by any term of this Agreement shall be deemed exclusive but each shall be cumulative with all other rights, remedies and elections available at law or in equity. 16.13 Captions. The headings of this Agreement are inserted for convenience only, shall not constitute a part of this Agreement or be used to construe or interpret any provision hereof. 16.14 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived only with the written consent of ITP, NEWCO, the COMPANY and NAMED STOCKHOLDERS who will hold or who hold at least 50% of the ITP Stock issued or to be issued to the STOCKHOLDERS upon consummation of the Merger. Any amendment or waiver effected in accordance with this Section 16.14 shall be binding upon each of the parties hereto, any other person receiving ITP Stock in connection with the Merger and each future holder of such ITP Stock. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein (SEAL) ---------------------- Name: Daniel J. Klein Title: President ITP NO. 10, INC. By: /s/ Daniel J. Klein (SEAL) ----------------------- Name: Daniel J. Klein Title: Chairman of the Board SEQUOIA DIVERSIFIED PRODUCTS, INC. By: /s/ John D. Banberger (SEAL) ----------------------- Name: John D. Bamberger Title: President NAMED STOCKHOLDERS: /s/John D. Bamberger ----------------------------- John D. Bamberger, as Trustee U-A, dated November 9, 1995 /s/ Alan E. Wise ----------------------------- Alan E. Wise, as Trustee U-A, dated December 13, 1995 /s/ William E. Murray ---------------------- William E. Murray /s/Michael J. Baltosiewich ---------------------------- Michael J. Baltosiewich, as Trustee U-A, dated October 20, 1972 /s/Carl J. Griffin -------------------------- Carl J. Griffin /s/William C. Church --------------------------- William C. Church /s/ Michael A. Ryan --------------------------- Michael A. Ryan EX-10.9 18 AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT Dated as of March 31, 1998 By and Among IT PARTNERS, INC. as the Borrower, THE LENDERS NAMED HEREIN, CREDITANSTALT CORPORATE FINANCE, INC., as the LC Issuer, CREDIT AGRICOLE INDOSUEZ, as Co-Agent, and CREDITANSTALT CORPORATE FINANCE, INC., as the Collateral Agent and Administrative Agent TABLE OF CONTENTS 1. DEFINITIONS AND REFERENCES 2 1.1 Certain Definitions 2 1.2 Use of Defined Terms 20 1.3 Accounting Terms; Calculations 20 1.4 Other Terms 20 1.5 Terminology 20 1.6 Exhibits 20 2. THE LOANS AND LETTERS OF CREDIT 20 2.1 Loans 20 2.2 Borrowing Procedures 21 2.3 Loan Account; Statements of Account 22 2.4 Use of Proceeds 22 2.5 Several Obligations of the Lenders; Remedies Independent 25 2.6 Letters of Credit 25 2.7 Term; Termination 28 2.8 Loans in Excess of Limitations 28 2.9 Payments 29 2.10 Prorata Treatment 29 2.11 Sharing of Payments, Etc. 30 2.12 Prepayment; Commitment Reduction 31 2.13 Certain Notices; Minimum Amounts 32 3. FEES AND INTEREST 33 3.1 Interest 33 3.2 Interest Period 34 3.3 Limitations on Interest Periods 34 3.4 Conversions and Continuations 34 3.5 Commitment Fee 34 3.6 Letter of Credit Fees 34 3.7 Illegality 35 3.8 Inability to Determine Quoted Rate 35 3.9 Increased Costs and Reduced Return 35 3.10 Indemnity 36 3.11 Notice of Amounts Payable 36 3.12 Interest Savings Clause 36 4. SECURITY INTEREST - COLLATERAL 37 4.1 Security Interest 37 4.2 Additional Collateral 38 4.3 Perfection of Security Interest 38 4.4 Right to Inspect; Verifications 38 5. REPRESENTATIONS AND WARRANTIES 39 5.1 Corporate Existence and Qualification 39 5.2 Corporate Authority; Valid and Binding Effect 39 5.3 No Conflict 39 5.4 Governmental Action 39 5.5 No Litigation 40 5.6 Solvency 40 5.7 Taxes 40 5.8 Financial Information 40 5.9 Title to Property 41 5.10 Violations of Law 41 5.11 ERISA 41 5.12 Environmental Laws 42 5.13 Margin Stock 42 5.14 No Default 42 5.15 Chief Executive Office; Collateral Locations 43 5.16 Corporate and Trade or Fictitious Names 43 5.17 Accounts 43 5.18 Adequacy of Intangible Assets 44 5.19 Equipment 44 5.20 Inventory 44 5.21 Investment Property 44 5.22 Indebtedness 44 5.23 Existing Liens 44 5.24 Trade Relations 45 5.25 Broker's or Finder's Fees 45 5.26 Security Interest 45 5.27 Regulatory Matters 45 5.28 Disclosure 45 5.29 Burdensome Restrictions 45 5.30 Senior Indebtedness 45 5.31 Shell Subsidiaries 46 6. AFFIRMATIVE COVENANTS 46 6.1 Records Respecting Collateral; Lockbox or Blocked Account Arrangement 46 6.2 Reporting Requirements 46 6.3 Tax Returns 48 6.4 Compliance With Laws 48 6.5 Environmental Laws 48 6.6 ERISA 48 6.7 Books and Records 49 6.8 Notifications to the Administrative Agent and the Lenders 49 6.9 Insurance 49 6.10 Maintenance of Intellectual Property 50 6.11 Preservation of Corporate Existence 50 6.12 Equipment 50 6.13 Other Indebtedness 50 6.14 Year 2000 Compliance 51 6.15 Assignment of Leasehold Interests 51 6.16 Additional Documents 51 6.17 Upstream Payment of Dividends and Distributions 51 7.. NEGATIVE COVENANTS 51 7.1 Liens 52 7.2 Indebtedness 52 7.3 Asset Sales 52 7.4 Guaranties 52 7.5 Investments and Acquisitions 52 7.6 Prohibition of Fundamental Changes 53 7.7 Issuance of Stock 53 7.8 Fiscal Year 53 7.9 ERISA 53 7.10 Relocations; Use of Name 54 7.11 Arm's-Length Transactions 54 7.12 Amendments 54 8. FINANCIAL COVENANTS 54 8.1 Net Worth 54 8.2 Leverage Ratio 54 8.3 Senior Debt Leverage Ratio 55 8.4 Interest Coverage Ratio 55 8.5 Dividends 55 9. EVENTS OF DEFAULT 55 9.1 Obligations 55 9.2 Misrepresentations 56 9.3 Covenants 56 9.4 Other Covenants 56 9.5 Other Debts 56 9.6 Tax Lien 56 9.7 ERISA 56 9.8 Voluntary Bankruptcy 57 9.9 Involuntary Bankruptcy 57 9.10 Suspension of Business 57 9.11 Judgments 57 9.12 RICO 57 9.13 Failure of Security 57 9.14 Guaranty 58 9.15 Intercompany Loan Documents 58 9.16 Management 58 9.17 Change of Control 58 9.18 Exercise of Put Option 58 10. REMEDIES 58 10.1 Default Rate 59 10.2 Termination; Acceleration of the Obligations 59 10.3 Set-Off 59 10.4 Rights and Remedies of a Secured Party 59 10.5 Take Possession of Collateral 59 10.6 Sale of Collateral 59 10.7 Judicial Proceedings 60 10.8 Actions in Respect of the Letters of Credit Upon Default 60 10.9 Notice 60 10.10 Appointment of the Collateral Agent as the Borrower's Lawful Attorney 61 11. CONDITIONS PRECEDENT 61 11.1 Conditions Precedent to Effectiveness 61 11.2 All Loans 64 11.3 Delay in Satisfaction of Conditions Precedent 65 12. THE AGENT 65 12.1 Appointment, Powers and Immunities 65 12.2 Reliance by Agents 65 12.3 Defaults 66 12.4 Rights as a Lender 66 12.5 Indemnification 66 12.6 Non-Reliance on Administrative Agent and the other Lenders 67 12.7 Failure to Act 67 12.8 Resignation or Removal of an Agent 67 12.9 Collateral Matters 68 12.10 The Borrower Not a Beneficiary 70 13. MISCELLANEOUS 71 13.1 Waiver 71 13.2 Survival 71 13.3 Assignments; Successors and Assigns 71 13.4 Counterparts 73 13.5 Expense Reimbursement 73 13.6 Severability 73 13.7 Notices 73 13.8 Entire Agreement; Amendment 74 13.9 Time of the Essence 74 13.10 Interpretation 75 13.11 Lenders Not Joint Venturers 75 13.12 Cure of Defaults by Lenders 75 13.13 Indemnity 75 13.14 Consequential Damages 76 13.15 Attorney-in-Fact 76 13.16 Financing Statements 76 13.17 Governing Law; Jurisdiction 76 13.18 Waiver of Jury Trial 2 Schedule 5.1 - Foreign Qualifications Schedule 5.5 - Litigation and Related Proceedings Schedule 5.7 - Taxes Schedule 5.11 - ERISA Matters Schedule 5.15 - Executive Offices; Business and Collateral Locations Schedule 5.16 - Corporate and Trade or Fictitious Names Schedule 5.18 - Intangible Assets Schedule 5.21 - Investments Schedule 5.23 - Existing Liens Schedule 5.22 - Existing Indebtedness Exhibit A - Form of Intercompany Loan and Security Agreement Exhibit B - Form of Master Contribution and Indemnity Agreement Exhibit C - Form of Master Subsidiary Guaranty Exhibit D - Form of Master Subsidiary Pledge Agreement Exhibit E - Form of Master Subsidiary Security Agreement Exhibit F - Form of Promissory Note Exhibit G - Form of Opinion of Counsel (Intercompany Loans) Exhibit H - Form of Request for Letter of Credit Exhibit I - Form of Notice of Borrowing Exhibit J - Form of Compliance Certificate Exhibit K - Form of Borrowing Availability Certificate Exhibit L - Form of Opinion of Swidler & Berlin, Chartered Exhibit M - Form of Assignment AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Agreement") is made and entered into as of the 31st day of March, 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Borrower"), each of the Lenders signatory hereto (hereinafter referred to individually as the "Lender" and collectively as the "Lenders"), CREDITANSTALT CORPORATE FINANCE, INC., as the letter of credit issuer (in such capacity, the "LC Issuer"), CREDIT AGRICOLE INDOSUEZ, as co-agent for the Lenders (in such capacity, together with its successors and assigns, the "Co-Agent") and CREDITANSTALT CORPORATE FINANCE, INC., as collateral agent for the Lenders (in such capacity, together with its successors and assigns, the "Collateral Agent") and administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Administrative Agent"; the Co-Agent, Collateral Agent and Administrative Agent are collectively, the "Agents" and individually an "Agent"). W I T N E S S E T H: WHEREAS, the Borrower and Creditanstalt Corporate Finance, Inc. ("CCF"), as agent and sole Lender, are a party to that certain Loan and Security Agreement dated as of May 30, 1997, as amended by that certain First Amendment to Loan and Security Agreement dated as of October 17, 1997, that certain Second Amendment to Loan and Security Agreement, dated as of December 16, 1997 and that certain Third Amendment to Loan and Security Agreement, dated as of March 13, 1998 (as so amended, the "Original Loan Agreement"), pursuant to which the lenders thereunder made available to the Borrower a revolving credit facility permitting advances up to Thirty-Five Million Dollars ($35,000,000) at any one time outstanding; and; WHEREAS, the Borrower has requested that CCF further amend the Original Loan Agreement (i) to increase the revolving credit facility by $35,000,000 to permit advances of up to Seventy Million Dollars ($70,000,000) at any one time outstanding, and (ii) to add Credit Agricole Indosuez as a Lender and a Co-Agent; and WHEREAS, the Lenders are willing to extend such financing to the Borrower, subject to the terms and conditions set forth herein; and WHEREAS, the Borrower, the Lenders and the Agents have agreed, for the sake of convenience, to amend and restate the Original Loan Agreement in its entirety as hereinafter set forth; NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are acknowledged by the parties hereto, the Borrower, the Lenders, the LC Issuer and the Agents hereby agree to amend and restate the Original Loan Agreement as follows: 1. DEFINITIONS AND REFERENCES 1.1 Certain Definitions. When used herein, the following terms shall have the following respective meanings: "Accounts" shall mean any "account," as such term is defined in Section 9-106 of the UCC, now owned or hereafter acquired by the Borrower and, in any event, shall include all of the accounts, contract rights, book debts and other forms of obligations (other than forms of obligations evidenced by Chattel Paper, Documents or Instruments) of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, all present and future rights to payments for goods, merchandise or Inventory sold or leased or for services rendered, whether or not represented by invoices or other billing, and whether or not earned by performance; proceeds of any letter of credit on which the Borrower is a beneficiary and all forms of obligations whatsoever owing to the Borrower, together with all instruments and documents of title representing any of the foregoing, all rights in any goods, merchandise or Inventory which any of the foregoing may represent, all rights in any returned or repossessed goods, merchandise or Inventory, and all rights, security and guaranties with respect to each of the foregoing, including, without limitation, any rights of stoppage in transit. "Account Debtor" shall mean any "account debtor," as such term is defined in Section 9-105(1)(a) of the UCC and, in any event, shall include any Person who is or may become obligated to the Borrower on any Account. "Acquisition" shall mean any transaction, or any series of related transactions by which (a) the Borrower acquires, directly or indirectly, the business or all or substantially all of the assets of any Person, or any division of any Person, whether through Investment, purchase of assets, merger, capital contribution or otherwise or (b) any Person that was not theretofore a Subsidiary of the Borrower becomes a Subsidiary of the Borrower. "Administrative Agent" shall have the meaning given to such term in the preamble of this Agreement. "Adjusted Cash Flow" shall mean for any Person for any Calculation Period, the sum of (a) such Person's Cash Flow for the Calculation Period, plus (b) to the extent not included in clause (a) above, the Cash Flow for the Calculation Period of any other Person acquired by such Person subsequent to the first day of the Calculation Period and prior to or simultaneously with the date of the Loan or Intercompany Loan for which such calculation is made, adjusted to give effect to the Acquisition of such Person on a pro forma basis as if such Acquisition occurred on the first (1st) day of the Calculation Period; provided, however, that any such adjustment that would increase the Cash Flow of such Person shall (x) be reviewed by a firm of independent public accountants of nationally recognized standing and (y) require approval of the Agents. "Affiliate" shall mean, as to any Person, any other Person which, directly or indirectly, owns or controls, on an aggregate basis, including all beneficial ownership and ownership or control as a trustee, guardian or other fiduciary, at least ten percent (10%) of the outstanding shares of capital stock having ordinary voting power to elect a majority of the board of directors or other governing body (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) of such Person or at least ten percent (10%) of the partnership or other ownership interest of such Person; or which controls, is controlled by or is under common control with such Person; provided, however, that in no event shall the Borrower and the Lender be deemed or regarded as Affiliates of each other. For the purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management and policies, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Loan and Security Agreement, as amended, modified or supplemented from time to time. "Agents" shall have the meaning given to such term in the preamble of this Agreement. "Applicable Law" shall mean all provisions of statutes, rules, regulations and orders of any Governmental Authority applicable to a Person, and all orders and decrees of all courts and arbitrators in proceedings or actions in which the Person in question is a party. "Applicable Margin" shall mean (a) with respect to Eurodollar Loans, four percent (4%) per annum and (b) with respect to Base Rate Loans, two percent (2%) per annum; provided however, that if on the last day of any fiscal quarter, commencing with the quarter ending June 30, 1998, Borrower's Senior Debt Leverage Ratio shall fall within any of the ranges set forth below, then, subject to delivery by a senior financial officer of Borrower of financial statements for that quarter, together with a Compliance Certificate of the chief financial officer of Borrower certifying as to Borrower's Senior Debt Leverage Ratio, in each case as required pursuant to Section 6.2(e) hereof, the Applicable Margin payable on the Loans shall be adjusted, from the date of Administrative Agent's receipt of such financial statements and Compliance Certificate until the date on which the next following quarterly financial statements are required to be delivered to the Administrative Agent, to the rate, calculated daily on the basis of a 360-day year and actual days elapsed, for the applicable type of Loan set forth opposite such range in the schedule below:
Senior Debt Base Eurodollar Rate Letter of Leverage Ratio Rate Loans Loans Credit Credit - -------------------------------------------------------------------------- Less than 3.50:1.00 1.50% 3.50% 3.50% but greater than or equal to 3.00:1.00 - -------------------------------------------------------------------------- Less than 3.00:1.00 1.25% 3.25% 3.25% but greater than or equal to 2.50:1.00 - -------------------------------------------------------------------------- Less than 2.50:1.00 1.00% 3.00% 3.00% but greater than or equal to 2.00:1.00 - -------------------------------------------------------------------------- Less than 2.00:1.00 0.75% 2.75% 2.75%
If Borrower does not qualify for an adjustment in interest rates as set forth above for any given fiscal quarter of Borrower or if no Compliance Certificate and quarterly financial statements are delivered by the required date, the Applicable Margin shall be those set forth in clauses (a) and (b) above. "Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as may be amended from time to time. "Base Lending Rate" shall mean an interest rate per annum, fluctuating daily, equal to the higher of (a) the rate announced by the Reference Bank from time to time, as its prime rate for domestic (United States) commercial loans in effect on such day; and (b) the Federal Funds Rate in effect on such day plus one-half of one percent (1/2%). The Base Lending Rate is not necessarily intended to be the lowest rate of interest charged by the Reference Bank in connection with extensions of credit. Each change in the Base Lending Rate shall result in a corresponding change in the interest rate hereunder with respect to a Base Rate Loan and such change shall be effective on the effective date of such change in the Base Lending Rate. "Base Rate Loan" shall mean a Loan bearing interest at a rate based on the Base Lending Rate. "Borrower" shall have the meaning given to such term in the preamble of this Agreement. "Borrowing Availability" shall mean, for any Person, for (a) the period beginning on the Effective Date and ending on May 30, 1998, the sum of an amount equal to such Person's Adjusted Cash Flow for the twelve (12) month period most recently ended multiplied by 4.0 minus the currently outstanding aggregate amount of Indebtedness permitted pursuant to Section 7.2(c) hereof; (b) the period beginning May 31, 1998 and ending on May 30, 1999, the sum of an amount equal to such Person's Adjusted Cash Flow for the twelve (12) month period most recently ended multiplied by 3.5 minus the currently outstanding aggregate amount of Indebtedness permitted pursuant to Section 7.2(c) hereof; and (c) thereafter, the sum of an amount equal to such Person's Adjusted Cash Flow for the twelve-month period most recently ended multiplied by 3.0 minus the currently outstanding aggregate amount of Indebtedness permitted pursuant to Section 7.2(c) hereof. "Borrowing Availability Certificate" shall have the meaning given to such term in Section 6.2(e)(ii) hereof. "Business Day" shall mean a day on which banks are not required or authorized to close in Greenwich, Connecticut and New York, New York and, if such day relates to a borrowing of, a payment or prepayment of principal or interest on, a Continuation or Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice by the Borrower with respect to any such borrowing, payment, prepayment, Continuation, Conversion or Interest Period, which is also a day on which dealings by and between banks in U.S. dollar deposits are carried out in the interbank Eurodollar market. "Calculation Period" shall be the six (6) month period most recently ended multiplied by two (2). "Capital Expenditures" shall mean, for any period, expenditures (including the aggregate amount of Capital Lease Obligations incurred during such period) incurred by the Borrower to acquire or construct fixed assets, plants and equipment (including renewals, improvements and replacements, but excluding repairs) during such period, computed on a consolidated basis for the Borrower and its consolidated Subsidiaries in accordance with GAAP. "Capital Lease Obligations" shall mean, as to any Person, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board) and, for the purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP (including such Statement No. 13). "Capital Stock" shall mean, as to any Person, any and all shares, interests, warrants, participations or other equivalents (however designated) of corporate stock of such Person. "Cash Flow" shall mean, for any Person, for any period for which the same is computed, the sum of (a) such Person's net income (loss) for such period, plus (b) such Person's Interest Expense for such period, plus (c) such Person's depreciation and amortization for financial reporting purposes for such period, plus (d) income tax expense for such period, computed in each case on a consolidated basis for such Person and its consolidated Subsidiaries in accordance with GAAP. "CCF" shall have the meaning given to such term in the preamble of this Agreement. "Chattel Paper" shall mean any "chattel paper," as such term is defined in Section 9-105(1)(b) of the UCC, now owned or hereafter acquired by the Borrower. "Co-Agent" shall have the meaning given to such term in the preamble of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder from time to time. "Collateral" shall mean the property of the Borrower in which the Collateral Agent has, or is to have, a Lien on or security interest in pursuant to this Agreement or the Loan Documents, or any of them, as security for payment of the Obligations. "Collateral Agent" shall have the meaning given to such term in the preamble of this Agreement. "Commitment" shall mean the aggregate obligation of the Lenders to make Loans and to incur Letter of Credit Obligations to the Borrower, subject to the terms and conditions hereof, up to an aggregate principal amount not to exceed at any one time outstanding as to all of the Lenders Seventy Million Dollars ($70,000,000), subject to reduction as set forth in Section 2.12 hereof. "Commitment Fee" shall mean that amount due and payable to the Lenders from the Borrower pursuant to and in the amount specified in Section 3.5 hereof. "Commitment Percentage" shall mean, as to each Lender, that amount, expressed as a percentage, equal to the ratio of the amount set forth opposite the name of such Lender on the signature pages hereto under the heading "Commitment" to the aggregate amount of the Commitment; provided, that the Commitment Percentage of each Lender shall be increased or decreased, as appropriate, to reflect any assignments made by such Lender pursuant to Section 13.3(c) hereof. "Continue," "Continuation" and "Continued" shall refer to the continuation pursuant to Section 3.4 hereof of a Eurodollar Loan as a Eurodollar Loan from one Interest Period to the next Interest Period. "Contracts" shall mean all contracts, undertakings, or other agreements (other than rights evidenced by Chattel Paper, Documents or Instruments) in or under which the Borrower may now or hereafter have any right, title or interest, including, without limitation, with respect to an Account, any agreement relating to the terms of payment or the terms of performance thereof. "Convert," "Conversion" and "Converted" shall refer to a conversion pursuant to Section 3.4 hereof of a Base Rate Loan into a Eurodollar Loan or of a Eurodollar Loan into a Base Rate Loan. "Copyrights" shall mean all of the following now or hereafter acquired by the Borrower: (a) all copyrights, registrations and applications therefor, (b) all renewals and extensions thereof, (c) all income, royalties, damages and payments now and hereafter due or payable or both with respect thereto, including, without limitation, damages and payments for past or future infringements or misappropriations thereof, (d) all rights to sue for past, present and future infringements or misappropriations thereof, and (e) all other rights corresponding thereto throughout the world. "Current Assets" shall mean all assets which in accordance with GAAP would be classified as current assets. "Current Liabilities" shall mean all liabilities which, in accordance with GAAP, would be classified as current liabilities. "Default" shall mean the occurrence of any event or condition which, after satisfaction of any requirement for the giving of notice or the lapse of time, or both, would become an Event of Default. "Default Rate" shall mean (a) with respect to any Loan or portion thereof, an interest rate per annum equal to two percent (2%) above the interest rate set forth for such Loan in Section 3.1(a)(i) or (ii) hereof or (b) with respect to any portion of the Obligations other than Loans, two percent (2%) above the rate set forth in Section 3.1(a)(ii) hereof. "Documents" shall mean any "documents," as such term is defined in Section 9-105(1)(f) of the UCC, now owned or hereafter acquired by the Borrower. "Effective Date" shall mean the date that this Agreement has been signed by the Borrower, the Lenders and the Agents and all conditions precedent set forth in Section 11.1 have been satisfied. "Environmental Laws" shall mean all federal, state, local and foreign laws relating to pollution or protection of the environment, including laws relating to emissions, discharges, releases or threatened releases of any Hazardous Substance into the environment (including without limitation ambient air, surface water, ground water or land), or otherwise relating to the generation, manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of Hazardous Substances and any and all regulations, codes, standards, plans, orders, decrees, writs, judgments, injunctions, notices or demand letters issued, entered, promulgated or approved thereunder. "Equipment" shall mean any "equipment," as such term is defined in Section 9-109(2) of the UCC, now owned or hereafter acquired by the Borrower, and, in any event, shall include all of the equipment, fixtures and leasehold improvements of the Borrower, whether now existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, all furniture, machinery, vehicles and trade fixtures, together with any and all accessories, accessions, parts and appurtenances thereto, substitutions therefor and replacements thereof. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and all rules and regulations from time to time issued or promulgated thereunder. "ERISA Affiliate" shall mean each trade or business (whether or not incorporated) which, together with the Borrower is treated as a single employer under Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loan" shall mean that portion of a Loan bearing interest at a rate based on the Quoted Rate. "Event of Default" shall mean any of the events or conditions described in Article 9 hereof. "Excess Cash Flow" shall mean, for any fiscal year of Borrower, an amount equal to (a) Borrower's Cash Flow for such fiscal year, less (b) Capital Expenditures by Borrower during such fiscal year, less (c) to the extent not previously included in item (b) hereof, scheduled payments of principal of Indebtedness of Borrower during such fiscal year less (d) Borrower's Interest Expense paid in cash during such fiscal year, less (e) Borrower's income tax expense paid in cash during such fiscal year less (f) increases in Working Capital from the first of such fiscal year to the last day of such fiscal year, plus (g) decreases in Working Capital from the first of such fiscal year to the last day of such fiscal year, all as set forth on the annual financial statements of Borrower delivered pursuant to Section 5.8(b) hereof and in each case computed on a consolidated basis for Borrower and its Subsidiaries in accordance with GAAP. "Federal Funds Rate" shall mean, for any day, the overnight federal funds rate in New York City, New York, as published for such day (or, if such day is not a New York Business Day, for the next preceding Business Day) in the Federal Reserve Statistical Release H.15 (519) or any successor publication, or if such rate is not so published for any day which is a New York Business Day, the average of the quotations for such day on overnight federal funds transactions in New York City received by the Administrative Agent from three federal funds brokers of recognized standing selected by the Administrative Agent. "Fee Letter" shall mean that certain letter agreement dated March 17, 1998 between Borrower and CCF providing for the payment of certain fees by the Borrower to CCF in its capacity as Administrative Agent and Collateral Agent. "Funded Debt" shall mean , for any Person, collectively, (a) the aggregate principal amount of Indebtedness for borrowed money which would, in accordance with GAAP, be classified as long-term debt, together with the current maturities thereof; (b) all Indebtedness outstanding under any revolving credit, line of credit or similar agreement providing for borrowings (and any extensions or renewals thereof), notwithstanding that any such Indebtedness is created within one year of the expiration of such agreement; (c) the principal component of Capital Lease Obligations; (d) all indebtedness, obligations or other liabilities of such Person with respect to letters of credit issued for such Person's account; and (e) any other Indebtedness bearing interest or carrying a similar payment requirement (including (i) any outstanding Capital Stock constituting Indebtedness under clause (d) of the definition thereof and (ii) any Indebtedness issued at a discount to its face amount), calculated in all cases for such Person and its Subsidiaries on a consolidated basis in accordance with GAAP. "GAAP" shall mean generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of the Borrower and its Subsidiaries, as reflected in the financial information referred to in Section 5.8 hereof. "General Intangibles" shall mean any "general intangibles," as such term is defined in Section 9-106 of the UCC, now owned or hereafter acquired by the Borrower, and, in any event shall include all general intangibles of the Borrower, whether now existing or acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, all choses in action, causes of action, corporate or other business records, inventions, designs, Patents, patent applications, service marks, Trademarks, trade names, Trade Secrets, proprietary or confidential information, inventions (whether patented or patentable or not) and technical information, procedures, designs, knowledge, know-how, software, data bases, data, skill, expertise, experience, processors, models, drawings, materials, records, goodwill, Copyrights, registrations, Licenses, franchises, customer lists, agency and other contracts, tax refund claims, computer programs, all claims under guaranties, Liens or other security held by or granted to the Borrower to secure payment of any of the Accounts by an Account Debtor, all rights to indemnification, and all other intangible property of every kind and nature (other than Accounts). "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, and any agency, department or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to any government. "Guarantee" shall mean a guarantee, an endorsement, a contingent agreement to purchase or to furnish funds for the payment or maintenance of, or otherwise to be or become contingently liable under or with respect to, the Indebtedness, other obligations, net worth, working capital or earnings of any Person, or a guarantee of the payment of dividends or other distributions upon the stock or equity interests of any Person, or an agreement to purchase, sell or lease (as lessee or lessor) property, products, materials, supplies or services primarily for the purpose of enabling a debtor to make payment of such debtor's obligations or an agreement to assure a creditor against loss, and including, without limitation, causing a bank or other financial institution to issue a letter of credit or other similar instrument for the benefit of another Person, but excluding endorsements for collection or deposit in the ordinary course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a correlative meaning. "Hazardous Substances" shall mean any pollutant, contaminant, hazardous, toxic or dangerous waste, substance or material, or any other substance or material regulated or controlled pursuant to any Environmental Law, including, without limiting the generality of the foregoing, asbestos, PCBs, petroleum products (including crude oil, natural gas, natural gas liquids, liquified natural gas or synthetic gas) or any other substance defined as a "hazardous substance," "extremely hazardous waste," "restricted hazardous waste," "hazardous material," "hazardous chemical," "hazardous waste," "regulated substance," "toxic chemical," "toxic substance" or other similar term in any Environmental Law. "Indebtedness" shall mean, as applied to any Person at any time, (a) all indebtedness, obligations or other liabilities of such Person (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, and any accrued interest, fees and charges relating thereto; (ii) under profit payment agreements or similar agreements; (iii) with respect to letters of credit issued for such Person's account; (iv) to pay the deferred purchase price of property or services, except unsecured accounts payable and accrued expenses arising in the ordinary course of business which are less than sixty (60) days past due; or (v) Capital Lease Obligations; (b) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any property of such Person, whether or not such indebtedness, obligations or liabilities are assumed by such Person, all as of such time; (c) all indebtedness, obligations or other liabilities of such Person in respect of any foreign exchange contract or Interest Hedge Agreement, net of liabilities owed to such Person by the counterparties thereon; (d) all Capital Stock of such Person subject (upon the occurrence of any contingency or otherwise) to mandatory redemption prior to the first anniversary of the Maturity Date; provided, however, that Indebtedness shall not include (i) Borrower's Series A Preferred Stock, or (ii) the "Warrants," as such term is defined in the Preferred Stock and Warrant Purchase Agreement; (e) indebtedness of others Guaranteed by such Person. "Instruments" shall mean any "instrument," as such term is defined in Section 9-105(1)(i) of the UCC, now owned or hereafter acquired by the Borrower, other than instruments that constitute, or are a part of a group of writings that constitute, Chattel Paper. "Intercompany Contribution and Indemnity Agreement" shall mean the Intercompany Contribution and Indemnity Agreement executed or to be executed by and among each Subsidiary receiving an Intercompany Loan. "Intercompany Loan and Security Agreement" shall mean a Loan and Security Agreement substantially in the form of Exhibit A attached hereto, by and between the Borrower, as the Lender, and a Subsidiary of the Borrower, as the Borrower, providing for the making of revolving loans by the Borrower to such Subsidiary and for the grant to the Borrower of a first priority lien and security interest in all of the assets of such Subsidiary to secure the Intercompany Loans thereunder. "Intercompany Guaranties" shall mean the guaranties in favor of the Borrower executed or to be executed by each Subsidiary receiving an Intercompany Loan in favor of the Borrower guaranteeing the obligations of each other Subsidiary of the Borrower under an Intercompany Loan and Security Agreement. "Intercompany Loan Documents" shall mean, with respect to the Intercompany Loans made by the Borrower to any Subsidiary of the Borrower, the Intercompany Loan and Security Agreements, the Intercompany Guaranties, the Intercompany Pledge Agreements, the Intercompany Contribution and Indemnity Agreement, the UCC-1 financing statements, and each of the other agreements, documents and instruments to be executed and delivered in connection therewith. "Intercompany Loans" shall mean revolving loans made by the Borrower to a Subsidiary of the Borrower from time to time in accordance with the terms of an Intercompany Loan and Security Agreement. "Intercompany Pledge Agreements" shall mean the pledge agreements in favor of the Borrower executed or to be executed by each Subsidiary receiving an Intercompany Loan (the "Pledging Subsidiary"), pledging to Borrower all issued and outstanding shares of stock of each Subsidiary of such Pledging Subsidiary as security for the obligations of each such Pledging Subsidiary under an Intercompany Loan and Security Agreement and Intercompany Guaranty. "Interest Coverage Ratio" shall mean, as to any Person, for any period, the ratio of (a) such Person's Cash Flow for such period to (b) such Person's Interest Expense (excluding any amortization of original issue discount related to the Subordinated Seller Notes) for such period, in each case calculated in accordance with GAAP. "Interest Expense" shall mean, for any period, as to any Person, total interest expense, whether paid, accrued or capitalized (including the interest component of Capital Lease Obligations), of such Person, including, but not limited to, all origination and other fees, all amortization of original issue discount and the net amount payable under any Interest Hedge Agreement between such Person and any other Person, computed in each case on a consolidated basis for such Person and its consolidated subsidiaries in accordance with GAAP. "Interest Hedge Agreement" shall mean, for any Person, an interest rate swap, cap or collar agreement or similar arrangement between such Person and one or more financial institutions providing for the transfer or mitigation of interest risks either generally or under specific contingencies. "Interest Period" shall mean, in connection with any Eurodollar Loan, the period beginning on the date such Eurodollar Loan is made, Continued or Converted and continuing for one (1), two (2), three (3) or six (6) months as selected by the Borrower in its Notice of Borrowing. Notwithstanding the foregoing, however, (a) any applicable Interest Period which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the immediately preceding Business Day; and (b) any applicable Interest Period which begins on a day for which there is no numerically corresponding day in the calendar month during which such Interest Period is to end shall (subject to clause (a) above) end on the last day of such calendar month. "Inventory" shall mean all "inventory," as such term is defined in Section 9-109(4) of the UCC, owned or hereafter acquired by the Borrower, and, in any event, shall include all of the inventory of the Borrower, whether now existing or acquired or arising or in which the Borrower now has or hereafter acquires any rights, including, without limitation, any and all goods, merchandise and other personal property, wheresoever located and whether or not in transit, which is or may at any time be held for sale or lease or to be furnished under any contract of service or held as raw materials, work in process, finished goods or materials, and supplies of any kind, nature or description used or consumed in the business of the Borrower, including, without limitation, all such property, the sale or other disposition of which has given rise to an Account and which may have been returned to or repossessed or stopped in transit by the Borrower. "Investment" shall mean, for any Person: (a) the acquisition (whether for cash, property, services or securities or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other ownership interests or other securities of any other Person or any agreement to make any such acquisition (including, without limitation, any "short sale" or any sale of any securities at a time when such securities are now owned by the Person entering into such short sale), (b) any deposit with, or advance, loan or other extension of credit to, such Person (other than any such advance, loan or extension of credit representing the purchase price of goods, intangibles or services sold or supplied in the ordinary course of business) or Guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such Person and (without duplication) any amount committed to be advanced, lent or extended to such Person, (c) any Acquisition other than the acquisition of goods, intangibles or services purchased in the ordinary course of business and accounted for as an expense in accordance with GAAP or as a Capital Expenditure or (d) the entering into of any Interest Hedge Agreement. "Investment Property" shall mean all "investment property" of the Borrower, as such term is defined in Section 9-115 of the UCC, whether now owned or existing or hereafter acquired or arising, and, in any event, shall include all of the following: (a) all securities of the Borrower, whether certificated or uncertificated; (b) any share, participation or other interest in a Person or in property or in an enterprise of a Person held directly or indirectly by the Borrower which is, or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; (c) all commodity futures contracts of the Borrower, options on any commodity futures contract held by the Borrower, all commodity options or other contracts of the Borrower that are traded on, or subject to the rules of, a board of trade that has been designated as a contract market for such contracts pursuant to the federal commodities laws or which are traded on one or more foreign commodity boards of trade, exchanges, or markets and are carried on the books of registered futures commodity merchant or on the books of a Person providing clearance or settlement services for a board of trade that has been designated as a contract market for such a contract pursuant to the federal commodities laws; (d) any of the foregoing held, directly or indirectly, in the name of any other Person to the extent such other Person has expressly agreed to treat the Borrower as the Person entitled to exercise the rights comprising the foregoing; and (e) all right, title and interest of the Borrower in any account to which any of the foregoing have been credited. "LC Issuer" shall have the meaning given to such term in the preamble of this Agreement. "Lenders" shall have the meaning given to such term in the preamble of this Agreement. "Letter of Credit" shall mean any documentary or standby letter of credit issued at the request and for the account of the Borrower or for which the Lenders have incurred Letter of Credit Obligations under Section 2.6 of this Agreement. "Letter of Credit Documents" shall mean, collectively, such reimbursement agreements and other instruments, documents or agreements as shall be executed by the Borrower with or in favor of the LC Issuer. "Letter of Credit Obligations" shall mean all outstanding obliga-tions incurred by the LC Issuer or any of its Affiliates at the request of the Borrower, whether di-rect or indirect, contingent or otherwise, due or not due, in con-nection with the issuance or deemed issuance by the LC Issuer or any of its Affiliates, of Letters of Credit, including, without limitation, the undrawn amount of any outstanding Letter of Credit and any amount disbursed by the LC Issuer or any of its Affiliates pursuant to a Letter of Credit for which the LC Issuer has not been reimbursed by the Borrower pursuant to Section 2.6 hereof. The amount of such Letter of Credit Obligations at any time shall equal the maxi-mum amount which may be payable by the LC Issuer pursuant to the Letters of Credit at such time. "Leverage Ratio" shall mean, as of the last day of any fiscal quarter of Borrower, the ratio of (a) the aggregate amount of Borrower's Funded Debt outstanding on such date, to (b) the Borrower's Adjusted Cash Flow for the Calculation Period then ending, in each case computed on a consolidated basis for Borrower and its Subsidiaries in accordance with GAAP. "License" shall mean any Patent License, Trademark License or other license as to which the Lender has been granted a security interest hereunder. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction). "Loans" shall mean, collectively, the loans made pursuant to Section 2.1 hereof and "Loan" shall mean any loan made pursuant to Section 2.1 hereof. "Loan Documents" shall mean this Agreement, the Fee Letter, the Notes, the Letter of Credit Documents, the Stock Pledge, the Master Subsidiary Guaranty, the Master Subsidiary Security Agreement, the Master Subsidiary Pledge Agreement, and the other instruments, documents or agreements executed by the Borrower, any of its Affiliates or any other Person pursuant to Sections 2.4(b), 4.2 or 11.1, hereof, any subordination agreement relating to Subordinated Debt, any financing statements covering portions or all of the Collateral and any and all other instruments, documents, and agreements now or hereafter executed and/or delivered by the Borrower in connection herewith, or any one, more, or all of the foregoing, as the context shall require, and "Loan Document" shall mean any one of the Loan Documents. "Majority Lenders" shall mean, at any time, the Lenders holding at least sixty-seven percent (67%) of the aggregate outstanding amount of the Commitments or, if the Commitments have been terminated, the Lenders holding at least sixty-seven percent (67%) of the aggregate outstanding principal amount of the Loans. "Margin Stock" shall mean "margin stock," as such term is defined from time to time in Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. "Master Contribution and Indemnity Agreement" shall mean the amended and restated master contribution and indemnity agreement, substantially in the form of Exhibit B attached hereto and incorporated herein by reference, executed by and among each Subsidiary of the Borrower. "Master Subsidiary Guaranty" shall mean the amended and restated master guaranty of the Obligations hereunder, substantially in the form of Exhibit C attached hereto and incorporated herein by reference, executed by each Subsidiary of the Borrower in favor of the Collateral Agent, for the benefit of the Lenders. "Master Subsidiary Pledge Agreement" shall mean the amended and restated master pledge agreement, executed by each Subsidiary of Borrower in favor of the Collateral Agent, for the benefit of the Lenders, substantially in the form of Exhibit D attached hereto and incorporated herein by reference, and pledging a second priority lien on and security interest in all of the stock, partnership interest or other ownership interest held by such Subsidiary in any other Subsidiary of Borrower to the Collateral Agent, for the benefit of the Lenders, as security for the Obligations. "Master Subsidiary Security Agreement" shall mean the amended and restated master security agreement, substantially in the form of Exhibit E attached hereto and incorporated herein by reference, executed and delivered by each Subsidiary of Borrower in favor of the Collateral Agent, for the benefit of the Lenders, and granting, respectively, a second priority security interest in and lien on all of the assets of such Subsidiary to the Collateral Agent, for the benefit of the Lenders. "Material Adverse Effect" shall mean any event or condition which, alone or when taken with other events or conditions occurring or existing concurrently therewith, (a) has or is reasonably expected to have a material adverse effect on the business, operations, condition (financial or otherwise), assets, liabilities, prospects, or properties of the Borrower or any of its Subsidiaries; (b) has or is reasonably expected to have any material adverse effect on the validity or enforceability of this Agreement or any Loan Document; (c) materially impairs or is reasonably expected to materially impair the ability of the Borrower to pay and perform the Obligations; (d) materially impairs or is reasonably expected to materially impair the ability of the Lender to enforce its rights and remedies under this Agreement and the Loan Documents; or (e) has or is reasonably expected to have any material adverse effect on the Collateral, the Liens of the Lender in the Collateral or the priority of such Liens. "Maturity Date" shall mean November 30, 2001. "MPPAA" shall mean the Multiemployer Pension Plan Amendments Act of 1980, amending Title V of ERISA. "Multiemployer Plan" shall have the same meaning as set forth in Section 4001(a)(3) of ERISA. "Net Income" shall mean, for any period and for any Person, the income (or loss) of such Person for such period, after deducting therefrom all operating expenses, provisions for all taxes and reserves and all other proper deductions, all determined in accordance with GAAP. "Net Worth" shall mean, as to any Person, at any time, the excess of such Person's total assets over Total Liabilities, excluding, however, from the definition of assets the amount of (a) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to the later to occur of (i) the Effective Date and (ii) the date any such Person acquired such asset; (b) treasury stock; (c) receivables from Affiliates of such Person; and (d) unamortized debt discount and expense of such Person, all determined in accordance with GAAP on a consolidated basis for such Person and its Subsidiaries. "Notes" shall have the meaning given such term in Section 2.1 hereof. "Notice of Borrowing" shall have the meaning given such term in Section 2.13(a) hereof. "Obligations" shall mean the Loans, the Letter of Credit Obligations and any and all other indebtedness, liabilities and obligations of the Borrower to the Agents or any Lender of every kind and nature (including, without limitation, interest, charges, expenses, attorneys' fees and other sums chargeable to the Borrower by the Agents or any Lender and future advances made to or for the benefit of the Borrower), arising under this Agreement or under any of the other Loan Documents, or acquired by the Agents from any other source, whether arising by reason of an extension of credit, opening of a letter of credit, loan, lease, guaranty, indemnification, Interest Hedge Agreement or in any other manner, in each case whether direct or indirect, absolute or contingent, primary or secondary, due or to become due, now existing or hereafter acquired or arising. "Operating Lease" shall mean, as to any Person, any lease that is not required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP (including Statement of Financial Accounting Standards No. 13 of the Financial Accounting Standards Board). "Patent License" shall mean all of the following, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights: any written agreement granting any right to make, use, sell, sublicense and/or practice any invention on which a Patent is in existence. "Patents" shall mean all of the following, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights: (a) all patents and patent applications, (b) all inventions and improvements described and claimed therein, (c) all reissues, divisions, continuations, renewals, extensions and continuations-in-part thereof, (d) all income, royalties, damages and payments now and hereafter due and/or payable to the Borrower with respect thereto, including without limitation, damages and payments for past, present or future infringements or misappropriations thereof, (e) all rights to sue for past present and future infringements or misappropriations thereof, and (f) all other rights corresponding thereto throughout the world. "PBGC" shall mean the Pension Benefit Guaranty Corporation established under ERISA, or any successor agency or Person performing substantially the same functions. "Permitted Liens" shall mean, collectively: (a) those Liens existing on the date hereof with respect to specific items of Equipment and described on Schedule 5.23 hereto; (b) Liens in favor of the Collateral Agent arising under the Loan Documents; (c) Liens on assets of Borrower's Subsidiaries in favor of the Collateral Agent, as assignee of the Borrower, arising under the Intercompany Loan Documents; and (d) Liens for (i) property taxes not delinquent, (ii) taxes not yet subject to penalties, (iii) pledges or deposits made under Workmen's Compensation, Unemployment Insurance, Social Security and similar legislation, or in connection with appeal or surety bonds incident to litigation, or to secure statutory obligations, and (iv) mechanics' and materialmen's Liens with respect to liabilities which are not yet due or which are being contested in good faith. "Person" shall mean and include any individual, sole proprietorship, partnership, joint venture, limited liability company, trust, unincorporated organization, association, corporation, institution, entity, party or government (whether national, federal, state, county, city, municipal, or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Plan" shall mean any employee benefit plan, program, arrangement, practice or contract, maintained by or on behalf of the Borrower or an ERISA Affiliate, which provides benefits or compensation to or on behalf of employees or former employees, whether formal or informal, whether or not written, including, but not limited to, the following types of plans: (a) Executive Arrangements - any bonus, incentive compensation, stock option, deferred compensation, commission, severance, "golden parachute," "rabbi trust," or other executive compensation plan, program, contract, arrangement or practice ("Executive Arrangements"); (b) ERISA Plans - any "employee benefit plan," except any Multiemployer Plan, as defined in Section 3(3) of ERISA, whether maintained by or for a single employee or by or for multiple employees, including, but not limited to, any defined benefit pension plan, profit sharing plan, money purchase plan, savings or thrift plan, stock bonus plan, employee stock ownership plan, or any plan, fund, program, arrangement or practice providing for medical (including post-retirement medical), hospitalization, accident, sickness, disability, or life insurance benefits ("ERISA Plans"); (c) Other Employee Fringe Benefits - any stock purchase, vacation, scholarship, day care, prepaid legal services, severance pay or other fringe benefit plan, program, arrangement, contract or practice ("Fringe Benefit Plans"); and (d) Multiemployer Plan - any Multiemployer Plan. "Preferred Stock and Warrant Purchase Agreement" shall mean that certain Second Amended and Restated Preferred Stock and Warrant Purchase Agreement dated as of the date hereof, by and among Borrower, CCF, FF-ITP, L.P., Indosuez IT Partners, Wachovia Capital Associates, Inc. and each of the other stockholders named on the signature pages thereto, as amended, modified, supplemented and/or restated from time to time. "Proceeds" shall mean "proceeds," as such term is defined in Section 9-306(1) of the UCC and, in any event, shall include, without limitation, (a) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Borrower from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to the Borrower from time to time in connection with any requisitions, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority) and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Quoted Rate" shall mean, when used with respect to an Interest Period for a Eurodollar Loan, the quotient of (i) the offered rate quoted by the Reference Bank in the interbank Eurodollar market in New York, New York or London, England on or about 11:00 a.m. (New York or London time, as the case may be) two (2) Business Days prior to such Interest Period for U.S. dollar deposits of an aggregate amount comparable to the principal amount of the Eurodollar Loan to which the Quoted Rate is to be applicable and for a period comparable to such Interest Period, divided by (ii) one (1) minus the Reserve Percentage. For purposes of this definition, (a) "Reserve Percentage" shall mean with respect to any Interest Period, the percentage which is in effect on the first day of such Interest Period under Regulation D as the maximum reserve requirement for member banks of the Federal Reserve System in New York City with deposits comparable in amount to those of the Reference Bank against Eurocurrency Liabilities and (b) "Eurocurrency Liabilities" has the meaning assigned to that term in Regulation D, as in effect from time to time. The Quoted Rate for the applicable period shall be adjusted automatically on and as of the effective date of any change in the applicable Reserve Percentage. "Reference Bank" shall mean Creditanstalt AG, an Austrian banking corporation acting through its Connecticut Branch; provided, however, that in the event the Creditanstalt AG no longer announces a prime rate or provides a Quoted Rate, the Reference Bank shall be such other bank or other financial institution, having rates substantially similar to Creditanstalt AG, as the Administrative Agent, in consultation with the Borrower, shall reasonably select. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System, as it may be amended from time to time. "Reportable Event" shall have the meaning set forth in Section 4043 of ERISA. "Request for a Letter of Credit" shall have the meaning given such term in Section 2.13(a) hereof. "Secured Indebtedness" shall mean, as applied to any Person, all Indebtedness of such Person that is secured in whole or in part by a Lien on any property of such Person. "Senior Debt" shall mean all Funded Debt of the Borrower other than Subordinated Debt. "Senior Debt Leverage Ratio" shall mean, as of the last day of any fiscal quarter of Borrower, the ratio of (a) the aggregate amount of Borrower's Senior Debt outstanding on such date, to (b) the Borrower's Adjusted Cash Flow for the Calculation Period then ending, in each case computed on a consolidated Basis for Borrower and its Subsidiaries in accordance with GAAP. "Solvent" shall mean, as to any Person, that such Person (a) has capital sufficient to carry on its business and transactions and all business and transactions in which it is about to engage, (b) is able to pay its debts as they mature and (c) owns property whose fair salable value is greater than the amount required to pay its debts (including contingent obligations). "Stockholder Agreement" shall mean that certain Amended and Restated Stockholder Agreement, dated as of the date hereof, by and among the Borrower, Daniel J. Klein, Jamie E. Blech, Martin Kandl, Haeyoung Kandl, Stanley A. Nice, John Clement, CCF FF-ITP, L.C., Indosuez IT Partners, Wachovia Capital Associates, Inc. and the other stockholders of Borrower. "Stock Pledge Agreement" shall mean that certain Stock Pledge Agreement of even date herewith, as the same may be amended, restated, supplemented or otherwise modified from time to time, by and between the Borrower and the Collateral Agent, pursuant to which the Borrower pledges to the Collateral Agent, for the benefit of the Lenders and the Agents, all of the issued and outstanding Capital Stock of each Subsidiary of the Borrower. "Subordinated Debt" shall mean collectively (a) the Subordinated Seller Notes and (b) all other Indebtedness of the Borrower that is unsecured and has been subordinated in right of payment to the payment in full of the Obligations, all on terms and conditions satisfactory to the Agents and the Majority Lenders. "Subordinated Seller Notes" shall mean promissory notes issued by Borrower as a portion of the consideration payable in connection with an Acquisition permitted by, or consented to by the Majority Lenders in accordance with, Section 7.5 hereof and which have been subordinated in right of payment to the payment in full of the Obligations, all on terms and conditions satisfactory to the Agents and the Majority Lenders. "Subsidiary" shall mean, as to any Person, any other Person, of which more than fifty percent (50%) of the outstanding shares of Capital Stock or other ownership interest having ordinary voting power to elect a majority of the board of directors of such corporation or similar governing body of such other Person (irrespective of whether or not at the time stock or other ownership interests of any other class or classes of such other Person shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or by one or more "Subsidiaries" of such Person. "Tax" shall mean and include any present or future tax, levy, cost or charge of any nature imposed by any government or any authority or political subdivision thereof, excluding taxes on or measured by the net income of the Lender imposed by any jurisdiction in which the principal or relevant lending office of the Lender is located. "Termination Date" shall mean the earliest of (a) the Maturity Date; (b) the date the Commitment is reduced to zero pursuant to Section 2.12 hereof; and (c) the date the Commitment is terminated pursuant to Section 10.2 hereof. "Total Liabilities" shall mean all Obligations, Indebtedness or other liabilities of any kind or nature, fixed or contingent, due or not due, which, in accordance with GAAP, would be classified as a liability on the consolidated balance sheet of the Borrower and its consolidated Subsidiaries, together with any obligation, indebtedness or other liability of any kind or nature, fixed or contingent, due or not due, which, in accordance with GAAP, would be classified as a liability on the balance sheet of any Person other than the Borrower and its consolidated Subsidiaries and which has been Guaranteed by the Borrower or any of its consolidated Subsidiaries. "Trade Secrets" shall mean (a) trade secrets, along with any and all (b) income, royalties, damages and payments now and hereafter due and/or payable to the Borrower with respect thereto, including, without limitation, damages and payments for past or future infringements or misappropriations thereof, (c) rights to sue for past, present and future infringements or misappropriations thereof, and (d) all rights corresponding thereto throughout the world. "Trademark License" shall mean all of the following, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights: any written agreement granting any right to use any Trademark or trademark registration. "Trademarks" shall mean all of the following, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights: (a) all trademarks (including service marks and trade names, whether registered or at common law), registrations and applications therefor, and the entire product lines and goodwill of the business of the Borrower connected therewith and symbolized thereby, (b) all renewals thereof, (c) all income, royalties, damages and payments now and hereafter due or payable or both with respect thereto, including, without limitation, damages and payments for past, present or future infringements or misappropriations thereof, (d) all rights to sue for past, present and future infringements or misappropriations thereof, and (e) all other rights corresponding thereto throughout the world. "UCC" shall mean the Uniform Commercial Code as in effect in the State of New York. "Working Capital" shall mean, as of any date, the amount by which Borrower's Current Assets exceed Borrower's Current Liabilities. 1.2 Use of Defined Terms. All terms defined in this Agreement and the Exhibits hereto shall have the same defined meanings when used in any other Loan Document, unless the context shall require otherwise. 1.3 Accounting Terms; Calculations. All accounting terms not specifically defined herein shall have the meanings generally attributed to such terms under GAAP. Calculations hereunder shall be made and financial data required hereby shall be prepared, both as to classification of items and as to amounts, in accordance with GAAP, consistently applied (except as otherwise specifically required herein). 1.4 Other Terms. All other terms used in this Agreement which are not specifically defined herein but which are defined in the UCC shall have the meanings set forth therein. 1.5 Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine or neuter gender, shall include all other genders; the singular shall include the plural, and the plural shall include the singular. Titles of Articles and Sections in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement, and all references in this Agreement to Articles, Sections, subsections, paragraphs, clauses, subclauses, Exhibits or Schedules shall refer to the corresponding Article, Section, subsection, paragraph, clause, subclause of, Exhibit or Schedule attached to, this Agreement, unless specific reference is made to the articles, sections or other subdivisions of, exhibits or schedules to, another document or instrument. All references to any instrument, document or agreement shall, unless the context otherwise requires, refer to such instrument, document or agreement as the same may be, from time to time, amended, modified, supplemented, renewed, extended, replaced or restated. 1.6 Exhibits. All Exhibits and Schedules attached hereto are by reference made a part hereof. 2. THE LOANS AND LETTERS OF CREDIT 2.1 Loans. Subject to the terms and conditions hereof and provided that there exists no Default or Event of Default, each Lender severally agrees to make one (1) or more loans (each a "Loan" and collectively, the "Loans") to the Borrower, upon the Borrower's request therefor made in accordance with the provisions of Section 2.2 hereof, from time to time on any Business Day during the period from the date hereof and up to, but not including, the Termination Date in an aggregate principal amount not to exceed at any one time outstanding, an amount equal to (a) the lesser of (i) the Commitment and (ii) the Borrowing Availability of the Borrower, less (b) the aggregate Letter of Credit Obligations outstanding; provided, however, that in the case of any Loan the proceeds of which are to be used for the purpose of making an Acquisition, the principal amount of such Loan shall not, unless the Majority Lenders otherwise agree, exceed the Borrowing Availability of the business that is the subject of the Acquisition. The Loans made by each Lender shall be evidenced by a promissory note, substantially in the form of Exhibit F attached hereto, payable to the Lender in the original principal face amount of such Lender's Commitment (together with any and all amendments, modifications and supplements thereto, and any renewals, replacements or extensions thereof, in whole or in part, individually, a "Note" and collectively, the "Notes"). Prior to the Termination Date, Loans may be borrowed, repaid and reborrowed in accordance with the terms hereof. All Loans shall be payable in full on the Termination Date. 2.2 Borrowing Procedures. (a) The Borrower shall give the Administrative Agent notice of each request for a Loan hereunder in accordance with Section 2.2 hereof. The Administrative Agent shall promptly notify each Lender of any Notice of Borrowing received hereunder. Not later than 11:00 a.m. (prevailing Eastern time), on the date specified for each borrowing hereunder, each Lender shall make available to the Administrative Agent the amount of the Loan to be made by such Lender in accordance with such Lender's Commitment Percentage of the Loan requested, in immediately available funds at an account of the Administrative Agent designated by the Administrative Agent. The Administrative Agent shall, subject to the terms and conditions of this Agreement, not later than 2:00 p.m. (prevailing Eastern time) on the Business Day specified for such borrowing, make such amount available to the Borrower in same day funds at the office of Administrative Agent. (b) Unless the Administrative Agent shall have been notified by any Lender at least one (1) Business Day prior to the date on which any Eurodollar Loan is to be made to the Borrower and not later than 11:00 a.m. (prevailing Eastern time) on the date any Base Rate Loan is to be made, that such Lender does not intend to make available to the Administrative Agent such Lender's Commitment Percentage of such borrowing, the Administrative Agent may assume that such Lender has made such amount available to the Administrative Agent on the date of such Loan and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Lender, the Administrative Agent shall be entitled to recover such corresponding amount on demand from such Lender, which demand shall be made in a reasonably prompt manner. If such Lender does not pay such a corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower and the Borrower shall pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from such Lender interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount as recovered by the Administrative Agent at a rate per annum equal to the Federal Funds Rate, for the first two (2) Business Days, and thereafter at the rate per annum then in effect with respect to Base Rate Loans. Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or the Borrower may have against any Lender as a result of any default by such Lender hereunder. (c) Borrower agrees that, on the Effective Date, it shall borrow Loans from the Lenders who are not party to the Original Loan Agreement and repay Loans of the other Lenders such that, after giving effect thereto, the Loans (including, without limitation, the principal amounts, types and (if applicable) Interest Periods thereof) shall be held by the Lenders ratably in accordance with their Commitment Percentage of the Commitment by reference to the principal amounts of the Loans. 2.3 Loan Account; Statements of Account. The Administrative Agent will maintain one or more loan accounts for the Borrower to which the Administrative Agent will charge all amounts advanced to or for the benefit of the Borrower hereunder or under any of the other Loan Documents and to which the Administrative Agent will credit all amounts collected under each such credit facility from or on behalf of the Borrower. The Administrative Agent will account to the Borrower periodically with a statement of charges and payments made pursuant to this Agreement, and each such account statement shall be deemed final, binding and conclusive unless the Administrative Agent is notified by the Borrower in writing to the contrary within thirty (30) days of the date of each account statement. Any such notice shall only be deemed an objection to those items specifically objected to therein. The unpaid principal amount of the Loans, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount and the accrued and unpaid fees, premiums and other amounts due hereunder shall at all times be ascertained from the records of the Administrative Agent and such records shall constitute prima facie evidence of the amounts so due and payable. 2.4 Use of Proceeds. (a) The proceeds of the Loans shall be used (i) for costs and expenses related to the closing of Acquisitions, and (ii) for the purpose of making one or more Intercompany Loans to Subsidiaries of Borrower; provided, however, that the aggregate amount of such Intercompany Loans made to any Subsidiary shall not exceed, at any one time outstanding, such Subsidiary's Borrowing Availability. (b) As a condition to the making of the initial Intercompany Loan to each Subsidiary of the Borrower, the Borrower and/or such Subsidiary shall execute and deliver to the Collateral Agent each of the following instruments, documents and agreements, each in form and substance satisfactory to the Collateral Agent in its sole discretion: (i) an Intercompany Loan and Security Agreement; (ii) an Intercompany Guaranty; (iii) if such Subsidiary has Subsidiaries of its own, an Intercompany Pledge Agreement, pledging to the Borrower, as security for such Intercompany Loan, all of the issued and outstanding shares of Capital Stock or other ownership interests in all Subsidiaries of such Subsidiary; (iv) UCC-1 Financing Statements for each jurisdiction in which such Subsidiary maintains or is deemed to maintain any personal property, which UCC-1 Financing Statements names such Subsidiary as the debtor, the Borrower as the secured party, and the Collateral Agent as assignee of the secured party; (v) an Addendum to Master Subsidiary Guaranty, pursuant to which such Subsidiary becomes a party to the Master Subsidiary Guaranty and guarantees the payment and performance of the Obligations (as defined in the Master Subsidiary Guaranty); (vi) an Addendum to Master Subsidiary Security Agreement, pursuant to which such Subsidiary becomes a party to the Master Subsidiary Security Agreement and grants a Lien on all of its assets as security for the Obligations (as defined in the Master Subsidiary Security Agreement); (vii) an Addendum to Master Subsidiary Pledge Agreement, amending the Master Subsidiary Pledge Agreement to pledge all of the issued and outstanding shares of Capital Stock or other ownership interest in such Subsidiary and in all Subsidiaries of such Subsidiary, if any, to the Collateral Agent as security for the Obligations; (viii) an Addendum to Master Contribution and Indemnity Agreement, amending the Master Contribution and Indemnity Agreement executed by and between the Subsidiaries of the Borrower with respect to the Obligations of such Subsidiaries (as defined in the Master Contribution and Indemnity Agreement); (ix) an amendment to the Stock Pledge Agreement, amending the Stock Pledge Agreement to pledge all of the issued and outstanding shares of Capital Stock or other ownership interest in such Subsidiary to the Collateral Agent as security for the Obligations; (x) copies of all filing receipts or acknowledgments issued by any Governmental Authority to evidence any filing or recordation necessary to perfect the security interests of the Borrower or the Collateral Agent in the personal property of such Subsidiary and evidence in a form acceptable to the Collateral Agent that such security interests constitute valid and perfected first priority security interests; (xi) one or more assignments executed by the Borrower in favor of the Collateral Agent assigning all of the Borrower's right, title and interest in, to and under such Intercompany Loan Documents to which such Subsidiary is a party to the Collateral Agent as security for the Obligations in accordance with Section 4.2 hereof; (xii) a certificate of the chief financial officer of the Borrower certifying that: (A) both before and after giving effect to the making of such Intercompany Loan, the representations and warranties set forth in Article 5 of this Agreement and the applicable Intercompany Loan and Security Agreement are true and correct in all material respects; and (B) both before and after giving effect to the making of such Intercompany Loan, no Default or Event of Default has occurred or is continuing; (xiii) a certificate of the Secretary of such Subsidiary dated as of the closing date of the Intercompany Loan and Security Agreement certifying (A) that attached thereto is a true and correct copy of the By-laws of such Subsidiary, as in effect on the date of such certification, (B) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of such Subsidiary, authorizing the execution, delivery and performance of such Intercompany Loan and Security Agreement, Intercompany Guaranty and the agreements, documents and instruments executed and delivered in connection therewith; and (C) as to the incumbency and genuineness of the signatures of the officers of such Subsidiary executing such Intercompany Loan Agreement, Intercompany Guaranty or any of the agreements, documents or instruments to be executed in connection therewith; (xiv) an opinion of counsel to such Subsidiary and the Borrower, substantially in the form of Exhibit G hereto; and (xv) such other instruments, documents and agreements as the Collateral Agent may reasonably request. (c) No portion of the proceeds of any Loan may be used by the Borrower in any manner which would cause such Loan or the application of the proceeds thereof to violate any of Regulations G, T, U or X of the Board of Governors of the Federal Reserve System. 2.5 Several Obligations of the Lenders; Remedies Independent. The failure of any Lender to make any Loan to be made by it on the date specified therefor shall not relieve any other Lender of its obligation to make any Loan to be made by it on such date, but neither any Lender nor any Agent shall be responsible for the failure of any other Lender to make a Loan to be made by such other Lender. The amounts payable by the Borrower at any time hereunder and under the Note to each Lender shall be a separate and independent debt and each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and its Note, and it shall not be necessary for any other Lender or Agent to consent to, or be joined as an additional party in, any proceeding for such purposes. 2.6 Letters of Credit. (a) Subject to the terms and conditions hereof and provided that there exists no Default or Event of Default, at any time and from time to time from the Effective Date to (but not including) the Maturity Date, the LC Issuer agrees, in reliance upon the agreement of the Lenders set forth in Section 2.6(c) below, to issue, for the account of the Borrower, such Letters of Credit as the Borrower may request by a Request for Letter of Credit (in the manner described in Section 2.6(b)), each in such form as may be requested from time to time by the Borrower and agreed to by the LC Issuer; provided, however, that after giving effect to the issuance of any such Letter of Credit, (i) the aggregate amount of all Letter of Credit Obligations of the Borrower outstanding at any one time does not exceed $1,000,000, and (ii) the aggregate amount of all outstanding Loans, together with all outstanding Letter of Credit Obligations, will not exceed the lesser of (A) the Commitment and (B) the Borrowing Availability of the Borrower. No Letter of Credit shall be issued by the LC Issuer under this Section 2.6(a) except to the extent reasonably necessary in connection with transactions in the ordinary course of business of the Borrower and its Subsidiaries. The expiration date of any such Letter of Credit shall not extend beyond the earliest of (i) one (1) year from the date of issuance thereof, (ii) the Maturity Date, and (iii) any date fixed for termination of the Commitment pursuant to Section 2.12 hereof. (b) Each request by the Borrower to the LC Issuer for a Letter of Credit shall either be oral, with prompt written confirmation, which may be by telecopy; or in writing, with such written confirmation or writing to be substantially in the form of Exhibit H attached hereto (a "Request for Letter of Credit") and shall be effective only if received by LC Issuer prior to 10:00 a.m. (prevailing Eastern time) at least three (3) Business Days prior to the date when such Letter of Credit is required, accompanied by an appropriate letter of credit application on the LC Issuer's customary form and such other Letter of Credit Documents (including, without limitation, a reimbursement agreement) in such form and containing such terms and conditions as the LC Issuer requires, executed by the chief executive officer of the Borrower. Promptly upon receipt of a Request for a Letter of Credit, the LC Issuer will notify the Administrative Agent and each Lender of such request. (c) Simultaneously with the issuance by the LC Issuer of any Letter of Credit under Section 2.6(a) above, each Lender shall be deemed to have irrevocably and unconditionally purchased and received from the LC Issuer, without recourse or warranty, an undivided interest and participation in such Letter of Credit (including, without limitation, all obligations of the Borrower with respect thereto) and any security therefor or guaranty pertaining thereto, equal to such Lender's Commitment Percentage of such Letter of Credit. Each Lender severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Lender's Commitment Percentage, to reimburse the LC Issuer on demand for the amount of each draft paid by the LC Issuer under such Letter of Credit to the extent that such amount is not reimbursed by the Borrower. The failure of any Lender to make available to the LC Issuer its Commitment Percentage of the unreimbursed amount of any such payment shall not relieve any other Lender of its obligation hereunder to make available to the LC Issuer its Commitment Percentage of the unreimbursed amount of any payment on the date such payment is to be made. The obligations of each Lender to make payments to the LC Issuer with respect to any Letter of Credit and its participations therein pursuant to the provisions of this Section or otherwise and the obligations of the Borrower to make payments to the LC Issuer with respect to any Letter of Credit shall be irrevocable, and shall not be subject to any qualification or exception whatsoever. In the event that any payment by the Borrower received by the LC Issuer with respect to a Letter of Credit and distributed by the LC Issuer to the Lenders on account of their participations is thereafter set aside, avoided or recovered from the LC Issuer in connection with any receivership, liquidation, reorganization or bankruptcy proceeding, each Lender which received such distribution shall, upon demand by the LC Issuer, contribute such Lender's Commitment Percentage of the amount set aside, avoided or recovered, together with interest at the rate required to be paid by the LC Issuer upon the amount required to be repaid by it. Each Lender shall share, pro rata, in accordance with its participating interest, in any interest (but not in the processing, administration and similar fees charged by the LC Issuer, which fees shall be solely for the account of the LC Issuer) which accrues to the LC Issuer pursuant to any applicable reimbursement agreement. (d) The Borrower hereby agrees to reimburse, within five (5) Business Days after demand therefor, a principal amount equal to any payment made by the LC Issuer in respect of any Letter of Credit, together with interest on such amount from the date of any payment through the date of payment by the Borrower at the per annum rate applicable to Base Rate Loans; provided, however, that subject to the terms and conditions hereof the Borrower may substitute for such payment a request made within the time permitted hereunder for a Loan (which shall be a Base Rate Loan) in accordance with Section 2.13. The principal amount of any such payment made by the Borrower to the LC Issuer shall be used to reimburse the LC Issuer, or the Lenders, as the case may be, for the payment made by it in respect of such Letter of Credit. (e) If the Borrower fails to make any payment as and when required by Section 2.6(d), or if the Borrower fails to request a Loan in an amount sufficient to pay the outstanding Letter of Credit Obligations, the LC Issuer may, without notice to or the consent of the Borrower, deliver a Notice of Borrowing to the Administrative Agent for a Loan in an aggregate amount equal to the amount paid by the LC Issuer in respect of its Letter of Credit Obligations pursuant to Section 2.6(c) above and, for this purpose, the conditions precedent to the making of a Loan under this Agreement shall not apply. The proceeds of such Loan shall be paid to the LC Issuer to reimburse it for any pay-ments made by it in respect of such Letter of Credit Obligations. (f) The issuance of any supplement, modification, amendment, renewal or extension to or of any Letter of Credit shall be treated in all respects the same as the issuance of a new Letter of Credit, and each such Letter of Credit, and all Letter of Credit Obliga-tions in respect thereof, shall in each case remain subject to this Section 2.6. (g) If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the LC Issuer shall notify the Administrative Agent and the Borrower of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If the Borrower fails to reimburse the LC Issuer pursuant to the applicable reimbursement agreement as provided in Section 2.6(d) above, the LC Issuer may at any time thereafter notify the Administrative Agent and its Lenders of the amount of any such unpaid reimbursement obligation. No later than 3:00 p.m. (prevailing Eastern time) on the Business Day next following the receipt of such notice, each Lender shall make available to the LC Issuer at the LC Issuer's principal office in Greenwich, Connecticut, in immediately available funds, such Lender's Commitment Percentage of such unpaid reimbursement obligation, together with an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the LC Issuer for federal funds acquired by the LC Issuer during each day included in such period, times (ii) an amount equal to such Lender's Commitment Percentage of such unpaid reimbursement obligation, times (iii) a fraction, the numerator of which is the number of days that elapse from and including the date the LC Issuer paid the draft presented for honor or otherwise made payment to the date on which such Lender's Commitment Percentage of such unpaid reimbursement obligation shall become immediately available to the LC Issuer and the denominator of which is 360; provided, however, that if the LC Issuer fails to give the Lenders notice the Borrower's failure to reimburse the LC Issuer, as the case may be, within three (3) Business Days following such failure, the Lenders shall be required to pay interest only for the period from and including the date the LC Issuer made payment through and including the third Business Day following such failure. The responsibility of the LC Issuer to the Borrower, the Agents and the Lenders shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. (h) The Borrower's obligations under this Section 2.6 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower may have or have had against the LC Issuer, the Agents, any Lender or any beneficiary of a Letter of Credit. The Borrower further agrees with the LC Issuer, the Agents and the Lenders that the LC Issuer, the Agents and the Lenders shall not be responsible for, and the Borrower's reimbursement obligations under Section 2.6(d) shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee. Neither the LC Issuer, the Agents nor the Lenders shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit. The Borrower agrees that any action taken or omitted by the LC Issuer, the Agents or any Lender under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith and without gross negligence, shall be binding upon the Borrower and shall not result in any liability on the part of the LC Issuer, the Agents or any Lender to the Borrower. (i) The LC Issuer shall be entitled to rely, and shall be fully protected in relying, upon any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the LC Issuer. The LC Issuer shall be fully justified in failing or refusing to take any action under this Agreement unless it shall first have received such advice or concurrence of the Majority Lenders as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. (j) As between the Borrower, on the one hand, and the Agents and the Lenders, on the other, the provisions of this Agreement, to the extent in conflict with any provision of any Letter of Credit Documents, shall control. 2.7 Term; Termination. This Agreement shall terminate upon the latest to occur of (a) the Termination Date; (b) the repayment and satisfaction of all Obligations; and (c) the termination or expiration of all Letters of Credit. 2.8 Loans in Excess of Limitations. The Borrower acknowledges that neither the Lenders nor the LC Issuer are obligated and do not presently intend to make Loans, incur Letter of Credit Obligations, or make other extensions of credit to the Borrower the principal amount of which, in the aggregate, at any time would exceed (a) the Commitment, (b) the Borrowing Availability of the Borrower, or (c) with respect to advances for the purpose of making an Acquisition, the Borrowing Availability of the business that is the subject of the Acquisition. However, it is agreed that, should the Loans, Letter of Credit Obligations or other extensions of credit incurred hereunder exceed any of such limitations, all of the obligations of the Borrower to the LC Issuer and the Lenders with respect to such Loans, Letter of Credit Obligations and extensions of credit shall nevertheless constitute Obligations under this Agreement and shall be entitled to the benefit of all Liens granted under this Agreement and all other Loan Documents. Notwithstanding the foregoing, if any amounts outstanding hereunder shall exceed any of such limitations, the Borrower shall immediately repay such excess amounts to the Administrative Agent. 2.9 Payments. (a) Each payment by the Borrower on the Loans shall be made prior to 1:00 p.m. (prevailing Eastern time) on the date due and shall be made without set-off or counterclaim to the Administrative Agent at its principal U.S. office located at 2 Greenwich Plaza, 4th Floor, Greenwich, Connecticut 06830 or at such other place or places as the Administrative Agent may designate from time to time in writing to the Borrower. Each such payment shall be in lawful currency of the United States of America and in immediately available funds. The Administrative Agent shall promptly remit to each Lender such Lender's share of any payment received by the Administrative Agent from the Borrower. (b) Each payment made by the Borrower hereunder to the LC Issuer, any Agent or any Lender shall either (i) be exempt from, and be made without reduction by reason of, any Tax or (ii) to the extent that any such payment shall be subject to any Tax, be accompanied by an additional payment by the Borrower of such amount as may be necessary so that the net amount received by the LC Issuer, each Agent and each Lender (after deducting all applicable Taxes) is the same as the LC Issuer, each Agent and each such Lender would have received had such payment not been subject to such Tax. Upon any payment of Tax by the Borrower, the Borrower shall promptly (and in any event within thirty (30) days) furnish to the Administrative Agent such tax receipts, certificates and other evidence of such payment as the Borrower may have or any Agent, the LC Issuer or any Lender may reasonably request. (c) If the due date of any payment hereunder or under the Note would otherwise fall on a day which is not a Business Day, then such payment shall be due on the next succeeding Business Day and interest shall be payable on the principal amount of such payment for the period of such extension. If the Administrative Agent has not received any payment due hereunder by the close of business on the date such payment is due, the Borrower authorizes the Administrative Agent, at its option, to submit, on Borrower's behalf, a Notice of Borrowing for the amount of such payment, to cause the Lenders to make a Loan in the amount of such payment and to apply the proceeds of such Loan to such payment. 2.10 Prorata Treatment. Except to the extent otherwise provided herein: (a) each borrowing from the Lenders under Sections 2.1 hereof shall be made from the Lenders and each payment of its Commitment Fee under Section 3.5 hereof and of the Letter of Credit fee under Section 3.6 hereof shall be made to the Administrative Agent for the account of the Lenders pro rata according to their respective Commitment Percentages; (b) each termination or reduction of the amount of the Commitments under Section 2.12 hereof shall be applied to the Lenders, pro rata according to their respective Commitment Percentages; (c) the making, Conversion and Continuation of Loans of a particular type shall be made pro rata among the Lenders according to their respective Commitment Percentages and then current Interest Period for each Eurodollar Loan shall be coterminous; (d) each payment or prepayment of principal of Loans by the Borrower shall be made for the account of the Lenders pro rata in accordance with their respective Commitment Percentages; provided, that if immediately prior to giving effect to any such payment in respect of any Loans the outstanding principal amount of the Loans shall not be held by the Lenders pro rata in accordance with their respective Commitment Percentages in effect at the time such Loans were made (by reason of a failure of a Lender to make a Loan hereunder in the circumstances described in the last paragraph of Section 13.8 hereof), then such payment shall be applied to the Loans in such manner as shall result, as nearly as is practicable in the judgment of the Administrative Agent, in the outstanding principal amount of the Loans being held by the Lenders prorata in accordance with their respective Commitment Percentages; and (e) each payment of interest on Loans by the Borrower shall be made for account of the Lenders prorata in accordance with the amounts of interest on such Loans then due and payable to the respective the Lenders. 2.11 Sharing of Payments, Etc. (a) The Borrower agrees that, in addition to (and without limitation of) any right of set-off, banker's lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for account of the Borrower at any of its offices, in dollars or in any other currency, against any principal of or interest on any of such Lender's Loans or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to the Borrower), in which case it shall promptly notify the Borrower and the Administrative Agent thereof; provided that such Lender's failure to give such notice shall not affect the validity thereof. (b) If any Lender shall obtain from the Borrower payment of any principal of or interest on any Loan owing to it or payment of any other amount under this Agreement through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise (other than from the Administrative Agent as provided herein), and, as a result of such payment, such Lender shall have received more than its Commitment Percentage of the principal of or interest on the Loans or such other amounts then due hereunder by such Borrower, it shall promptly notify the Administrative Agent of such payment and promptly purchase from such other the Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Loans or such other amounts, respectively, owing to such other the Lenders (or in interest due thereon, as the case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) prorata in accordance with the unpaid principal of and/or interest on the Loans or such other amounts, respectively, owing to each of the Lenders; provided, that if at the time of such payment the outstanding principal amount of the Loans shall not be held by the Lenders in accordance with their respective Commitment Percentages in effect at the time such Loans were made (by reason of a failure of a Lender to make a Loan hereunder in the circumstances described in the last paragraph of Section 13.8 hereof), then such purchases of participations and/or direct interests shall be made in such manner as will result, as nearly as is practicable in the judgment of the Administrative Agent, in the outstanding principal amount of the Loans being held by the Lenders according to each Lender's Commitment Percentage. To such end all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. (c) The Borrower agrees that any Lender so purchasing such a participation (or direct interest) may exercise all rights of set-off, banker's lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in the amount of such participation. (d) Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a set-off to which this Section 2.11 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 2.11 to share in the benefits of any recovery on such secured claim. 2.12 Prepayment; Commitment Reduction. (a) On April 1 of each fiscal year, commencing with the fiscal year following the fiscal year in which the sum of the aggregate outstanding principal balance of the Loans and aggregate outstanding Letter of Credit Obligations first equals or exceeds Sixty-Five Million Dollars ($65,000,000), the aggregate amount of the Commitments shall be reduced by an amount equal to, and the Borrower shall prepay the outstanding Loans in an amount equal to, sixty percent (60%) of Borrower's Excess Cash Flow for the immediately preceding fiscal year; provided, however, that Borrower shall not be required to reduce the Commitments below $10,000,000 pursuant to this Section 2.12(a). (b) Concurrently with the closing of any sale by Borrower of shares of its Capital Stock in an offering registered under the Securities Act of 1933, as amended, Borrower shall prepay the Loans in an amount equal to (i) the net cash proceeds received by the Borrower from the sale of such shares of Capital Stock less (ii) any prepayments of Subordinated Seller Notes made currently with such closing, to the extent such prepayments are permitted by Section 7.12 hereof. (c) Subject to the other terms and conditions hereof, upon written notice to the Administrative Agent in accordance with Section 13.7, the Borrower may, at its option, reduce the Commitment, in whole or in part, in integral multiples of $500,000, on the date specified in such notice, by paying to the Lender the accrued amount of the Commitment Fee applicable to the amount of the Commitment reduction. (d) In no event may the Borrower reduce the Commitment below the sum of (i) the principal amount of Loans outstanding hereunder and (ii) the Letter of Credit Obligations. (e) The Commitment shall be automatically reduced to zero on the Maturity Date. (f) The Commitment, once terminated or reduced, may not be reinstated or increased. (g) The Borrower may prepay the Loan, in whole or in part, as provided in Section 2.13, provided, however, that the Borrower may not prepay any Loan which is a Eurodollar Loan prior to the last day of the Interest Period applicable to such Eurodollar Loan unless the Borrower pays to the Administrative Agent, for the benefit of the Lenders, concurrently with such prepayment, all amounts payable to the Lenders pursuant to Section 3.10 hereof. 2.13 Certain Notices; Minimum Amounts. (a) All notices given by the Borrower to the Administrative Agent hereunder of terminations or reductions of the Commitment, or of borrowings, Conversions, Continuations or prepayments of Loans hereunder shall either be oral, with prompt written confirmation, which may be by telecopy; or in writing, with such written confirmation or writing, in the case of a borrowing, to be substantially in the form of Exhibit I attached hereto (a "Notice of Borrowing"); shall be irrevocable; shall be effective only if received by the Administrative Agent prior to 10:00 a.m. (prevailing Eastern time) on a Business Day which is: (i) at least fifteen (15) days prior to any such termination or reduction of the Commitment; (ii) not later than one (1) Business Day prior to the date such Loan is to be made as, Converted to or Continued as a Base Rate Loan; (iii) at least three (3) Business Days prior to the date such Loan is to be made as, Converted to or Continued as a Eurodollar Loan; (iv) at least five (5) days prior to any such prepayment, in the case of a prepayment of a Eurodollar Loan; and (v) not later than the date of any such prepayment, in the case of a prepayment of a Base Rate Loan. Each such notice to reduce the Commitment or to prepay the Loans shall specify the amount of the Commitment to be reduced or of the Loans to be prepaid and the date of such reduction or prepayment. Each such notice of borrowing, Conversion or Continuation shall specify: (1) the amount of such borrowing, Conversion or Continuation; (2) that the amount of the Loan to be made, Converted or Continued, when aggregated with all other Loans to be outstanding following the funding, Conversion or Continuation of such Loan, does not exceed the Borrowing Availability; (3) whether such Loan will be made, Converted or Continued as a Eurodollar Loan or as a Base Rate Loan; (4) the date such Loan is to be made, Converted or Continued (which shall be a Business Day and, if such Loan is to Convert or Continue a Eurodollar Loan then outstanding, shall not be prior to the last day of then current Interest Period for such outstanding Loan); and (5) if such Loan is a Eurodollar Loan, the duration of the Interest Period with respect thereto. If the Borrower fails to specify the duration of the Interest Period for any Eurodollar Loan, the Borrower shall instead be deemed to have requested that such Loan be made as, Converted to or Continued as a Base Rate Loan. Each request for a borrowing, Conversion or Continuation of a Loan, for the issuance of a Letter of Credit or for any other financial accommodation by the Borrower pursuant to this Agreement or the other Loan Documents shall constitute (x) an automatic warranty and representation by the Borrower to each Lender that there does not then exist a Default or Event of Default or any event or condition which, with the making of such Loan or the issuance of such Letter of Credit, would constitute a Default or Event of Default and (y) an affirmation that as of the date of such request all of the representations and warranties of the Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects, both before and after giving effect to the making of such Loan or the issuance of such Letter of Credit. If on the last day of the Interest Period of any Eurodollar Loan hereunder, the Administrative Agent has not received a timely notice hereunder to Convert, Continue or prepay such Loan, the Borrower shall be deemed to have submitted a notice to Convert such Loan to a Base Rate Loan. (b) Except for mandatory prepayments made pursuant to Section 2.8 hereof and Conversions or prepayments made pursuant to Section 3.7 hereof, each borrowing, Conversion and partial prepayment of principal of Loans shall be in a minimum principal amount of $100,000 and shall be in an integral multiple of $100,000 (borrowings, Conversions or prepayments of or into Loans of different types or, in the case of Eurodollar Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, Conversions and prepayments for purposes of the foregoing, one for each type of Loan or Interest Period). 3. FEES AND INTEREST 3.1 Interest. (a) Subject to modification pursuant to Section 10.1 hereof, the average daily outstanding principal amount of the Obligations (other than Obligations representing the undrawn amount of outstanding Letters of Credit) shall bear interest from the date thereof until paid in full at the following rates: (i) the outstanding principal amount of each Eurodollar Loan shall bear interest at a fixed rate of interest per annum equal to the Quoted Rate for then-current Interest Period for such Loan plus the Applicable Margin for Eurodollar Loans, calculated daily on the basis of a 360-day year and actual days elapsed; or (ii) the outstanding principal amount of each Base Rate Loan, Letter of Credit Obligations and all other sums payable by the Borrower hereunder shall bear interest at a fluctuating rate per annum equal to the Base Lending Rate plus the Applicable Margin for Base Rate Loans, calculated daily on the basis of a 360-day year and actual days elapsed; and (iii) the amount of any payment of principal and, to the extent permitted by Applicable Law, interest or other amount payable hereunder which is not paid when due, shall, at the election of the Administrative Agent, bear interest at the Default Rate. (b) Accrued interest shall be payable (i) in the case of Base Rate Loans, monthly on the first day of each month hereafter for the previous month, commencing April 1, 1998; (ii) in the case of a Eurodollar Loan, on the last day of each Interest Period, provided, however, that if any Interest Period in respect of a Eurodollar Loan is longer than three (3) months, such interest prior to maturity shall be paid on the last Business Day of each three (3) month interval within such Interest Period as well as on the last day of such Interest Period; (iii) in the case of any Loan, upon the payment or prepayment thereof; (iv) in the case of any other sum payable hereunder as set forth elsewhere in this Agreement or, if not so set forth, on demand; and (i) in the case of interest payable at the Default Rate, on demand. 3.2 Interest Period. The Interest Period for any Eurodollar Loan shall commence on the date such Loan is made, Converted or Continued as specified in the notice delivered pursuant to Section 2.13 hereof applicable thereto and shall continue for a period of one (1), two (2), three (3) or six (6) months, as specified in such notice for such Eurodollar Loan. If the Borrower fails to specify the duration of the Interest Period for any Eurodollar Loan in the notice therefor delivered pursuant to Section 2.13 hereof, such Loan shall instead be made or Converted, as appropriate, as a Base Rate Loan. 3.3 Limitations on Interest Periods. The Borrower may not select any Interest Period for any Eurodollar Loan which extends beyond the Maturity Date. Notwithstanding any other provision hereof to the contrary, the Borrower shall not have, in the aggregate for all Loans outstanding, more than four (4) different Interest Periods at any given time during the term of this Agreement (for which purpose Base Rate Loans shall be counted as an Interest Period). 3.4 Conversions and Continuations. So long as there then exists no Default or Event of Default hereunder, the Borrower shall have the right, on any Business Day, from time to time, upon written notice in accordance with Section 2.13 hereof, to Convert Loans of one type to Loans of the other type and to Continue Loans of one type as Loans of the same type; provided that a Eurodollar Loan may not be Converted to a Base Rate Loan prior to the end of the Interest Period applicable thereto. The Borrower agrees that, if it shall fail to repay any Loan or portion thereof when due (whether by acceleration or otherwise) and the Loan at such maturity is being maintained as a Eurodollar Loan, the Administrative Agent, without limiting the rights of the Agents or the Lenders hereunder or under the Note evidencing such Loan, may at any time and from time to time after such due date Convert to another type of Loan or Continue such Loan as a Loan of the same type. 3.5 Commitment Fee. The Borrower hereby agrees to pay to the Administrative Agent for the account of each Lender a commitment fee (the "Commitment Fee"), calculated on the basis of a 360-day year and actual days elapsed, equal to one-half of one percent (1/2 of 1%) per annum of the average daily amount by which the Commitment exceeds the sum of the aggregate principal amount of the outstanding Loans plus the aggregate outstanding Letter of Credit Obligations, payable on the first day of each calendar quarter thereafter for the previous calendar quarter or portion thereof (commencing with the first such date following the Effective Date) and on the Termination Date. 3.6 Letter of Credit Fees. As additional consideration for the issuance of any Letters of Credit pursuant to Section 2.6 hereof, the Borrower hereby agrees to pay to the Administrative Agent for the account of each Lender, in addition to the processing, administrative and similar fees charged by the LC Issuer in connection with the issuance of Letters of Credit and any other sums due pursuant to Section 2.6 hereof, a letter of credit fee on the average daily aggregate undrawn amount of the Letters of Credit at a per annum rate equal to the Applicable Margin for Letter of Credit, calculated on the basis of a 360-day year and actual days elapsed, payable on the first day of each calendar quarter for the previous calendar quarter or portion thereof (commencing with the first such date following the Effective Date) and on the Termination Date. 3.7 Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it shall become unlawful for any Lender to obtain funds in the London interbank market or for any Lender to maintain a Eurodollar Loan, then such Lender shall promptly notify the Administrative Agent and the Borrower whereupon (a) the right of Borrower to request any Eurodollar Loan shall thereupon terminate and (b) any Eurodollar Loan then outstanding shall commence to bear interest at the rate applicable to Base Rate Loans on the last day of the then applicable Interest Period or at such earlier time as may be required by Applicable Law. 3.8 Inability to Determine Quoted Rate. In the event that Administrative Agent determines (which determination shall be conclusive absent manifest error) that, by reason of circumstances affecting the London interbank market, quotation of interest rates for the relevant deposits referred to in the definition of the "Quoted Rate" herein are not being provided in the relevant amounts or for the relevant maturities for the purpose of determining rates of interest for a Eurodollar Loan, Administrative Agent will give notice of such determination to Borrower and each Lender at least one day prior to the date specified in such notice of borrowing, Conversion or Continuation for such Loan to be made. If any such notice is given, no Lender shall have any obligation to make available, maintain, Convert or Continue Eurodollar Loans. Until the earlier of the date any such notice has been withdrawn by Administrative Agent or the date when Administrative Agent, the Lenders and Borrower have mutually agreed upon an alternate method of determining the rates of interest payable on a Eurodollar Loan, as the case may be, Borrower shall not have the right to have or maintain any Eurodollar Loan. 3.9 Increased Costs and Reduced Return. (a) If any event shall occur (whether in the form of a reserve requirement (not included in the definition of the Quoted Rate), exchange control regulations, governmental charges, compliance with any guideline or request from any central bank or other Governmental Authority, changes in the interbank eurodollar market or the position of any Lender in such market or otherwise) and the result of any such event is, in any Lender's reasonable judgment, to increase the costs which such Lender determines are attributable to its making or maintaining any Eurodollar Loan, or its obligation to make available any Eurodollar Loan or to reduce the amount of any sum received or receivable by such Lender under this Agreement or the Note with respect to any Eurodollar Loan, then, within ten (10) days after demand by such Lender, the Borrower hereby agrees to pay to such Lender such additional amount or amounts as will compensate such Lender for such increased cost or reduction. (b) In addition to any amounts payable pursuant to Section 3.9(a) above, if the LC Issuer or any Lender shall have determined that the adoption after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy, or any change in any of the foregoing or in the enforcement or interpretation or administration of any of the foregoing by any court or any central bank or other Governmental Authority, charged with the enforcement or interpretation or administration thereof, or compliance by the LC Issuer or any Lender (or any lending office of any Lender) or the LC Issuer's or such Lender's holding company with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on the LC Issuer's or such Lender's capital or on the capital of the LC Issuer's or such Lender's holding company, if any, as a consequence of its making or maintaining any Loan, its incurring any Letter of Credit Obligations, or its incurring any obligations under this Agreement to a level below that which the LC Issuer or such Lender or the LC Issuer's or such Lender's holding company could have achieved but for such applicability, adoption, change or compliance (taking into consideration the LC Issuer's or such Lender's policies and the policies of the LC Issuer's or such Lender's holding company with respect to capital adequacy) by an amount deemed by the LC Issuer or such Lender to be material, then, upon demand by the LC Issuer or such Lender, the Borrower hereby agrees to pay to the LC Issuer or such Lender from time to time such additional amount or amounts as will compensate the LC Issuer or such Lender or the LC Issuer's or such Lender's holding company for any such reduction suffered. 3.10 Indemnity. The Borrower hereby indemnifies and agrees to hold harmless each Agent and each Lender from and against any and all losses or expenses which it may sustain or incur as a consequence of failure by the Borrower to consummate any notice of prepayment, borrowing, Conversion or Continuation made by the Borrower, including, without limitation, any such loss or expense arising from interest or fees payable by any Lender to lenders of funds obtained by it in order to maintain any Eurodollar Loan. The Borrower hereby further indemnifies and agrees to hold harmless each Agent and each Lender from and against any and all losses or expenses which it may sustain or incur as a consequence of prepayment of any Eurodollar Loan on other than the last day of the Interest Period for such Loan (including, without limitation, any prepayment pursuant to Sections 2.12, 3.7 and 3.12). The Borrower's obligations under this Section shall survive the termination of this Agreement and the repayment of the Obligations. 3.11 Notice of Amounts Payable. If any Agent, the LC Issuer or any Lender shall seek payment of any amounts from the Borrower pursuant to Sections 2.9(b), 3.9 or 3.10 hereof, it shall notify the Administrative Agent and the Borrower of the amount payable by the Borrower thereunder. A certificate of such Agent, the LC Issuer or such Lender seeking payment pursuant to Sections 2.9(b), 3.9 or 3.10 hereof, setting forth in reasonable detail the factual basis for and the computation of the amounts specified, shall be conclusive and binding on all parties for all purposes, absent manifest error, as to the amounts owed. The Borrower's obligations under this Section shall survive the termination of this Agreement and the repayment of the Obligations. 3.12 Interest Savings Clause. Nothing contained in this Agreement or in the Notes or in any Letter of Credit Documents or in any of the other Loan Documents shall be construed to permit any Lender to receive at any time interest, fees or other charges in excess of the amounts which such Lender is legally entitled to charge and receive under any law to which such interest, fees or charges are subject. In no contingency or event whatsoever shall the compensation payable to such Lender by the Borrower, howsoever characterized or computed, hereunder or under the Note or under any other agreement or instrument evidencing or relating to the Obligations, exceed the highest rate permissible under any law to which such compensation is subject. There is no intention that any Lender shall contract for, charge or receive compensation in excess of the highest lawful rate, and, in the event it should be determined that any excess has been charged or received, then, ipso facto, such rate shall be reduced to the highest lawful rate so that no amounts shall be charged which are in excess thereof; and such Lender shall apply such excess against the Loans then outstanding (with such application being made first against the Base Rate Loans, to the extent thereof, second against the Eurodollar Loans, to the extent thereof, and then to any other Obligations hereunder) and, to the extent of any amounts remaining thereafter, refund such excess to the Borrower. 4. SECURITY INTEREST - COLLATERAL 4.1 Security Interest. As security for the Obligations, the Borrower hereby reconfirms its grant made pursuant to the Original Loan Agreement, and hereby grants to the Collateral Agent, for the benefit of the Lenders, a continuing, first priority Lien (except for Permitted Liens) on and security interest in and to the following described property of the Borrower, whether now owned or existing or hereafter acquired or arising or in which the Borrower now has or hereafter acquires any rights and wheresoever located (sometimes herein collectively referred to as "Collateral"): (a) Accounts; (b) Chattel Paper; (c) Contracts; (d) Documents; (e) Equipment; (f) General Intangibles; (g) Investment Property; (h) Instruments; (i) Inventory; (j) All Intercompany Loan and Security Agreements and all other Loan Documents entered into from time to time and the rights of the Borrower thereunder, including, without limitation, any security interest in any and all assets of each Subsidiary of the Borrower granted to the Borrower by such Subsidiary pursuant to an Intercompany Loan and Security Agreement; (k) all monies, residues and property of any kind of the Borrower now or at any time or times hereafter, in the possession or under the control of any Agent or any Lender or a bailee of the Collateral Agent, the Co-Agent or any Lender; (l) all books and records (including, without limitation, customer lists, credit files, computer programs, print-outs and other computer materials and records) of the Borrower pertaining to any of the foregoing; (m) all accessions to, substitutions for and all replacements, products and Proceeds of the foregoing, including, without limitation, proceeds of insurance policies insuring the Collateral; and (n) any and all other property of the Borrower. 4.2 Additional Collateral. As additional security for the Obligations, the Borrower shall pledge to the Collateral Agent, for the benefit of the Lenders, (i) pursuant to the terms and conditions of the Stock Pledge Agreement, all of the issued and outstanding shares of Capital Stock of each Subsidiary which it currently holds or holds subsequent to the Effective Date, (ii) each Intercompany Loan and Security Agreement that it may become a party to subsequent to the Effective Date and all Intercompany Loan Documents executed in connection with such Intercompany Loan. The Borrower agrees that all of such additional security described in this Section 4.2 shall be included in the "Collateral." 4.3 Perfection of Security Interest. Until the termination of this Agreement in accordance with the terms of Section 2.7 hereof, the Collateral Agent's Lien in the Collateral and all products and Proceeds thereof, shall continue in full force and effect. The Borrower shall perform, and shall cause each of its Subsidiaries to perform, any and all steps requested by the Collateral Agent or the Majority Lenders to perfect, maintain and protect the Collateral's Lien in the Collateral including, without limitation, executing and filing financing or continuation statements, or amendments thereof, in form and substance satisfactory to the Collateral Agent; delivering to the Collateral Agent upon the Collateral Agent's request therefor all Documents, Instruments, Investment Property or Chattel Paper included in the Collateral, the possession of which is necessary or appropriate to perfect the Collateral Agent's Liens therein; delivering to the Collateral Agent all letters of credit on which the Borrower or any of its Subsidiaries is named as a beneficiary; and using best efforts to obtain and deliver such consents and waivers from such landlords, developers or other Persons as the Collateral Agent may request. The Collateral Agent may file one or more financing statements disclosing the Collateral Agent's Liens under this Agreement without the Borrower's signature appearing thereon and the Borrower shall pay the costs of, or incidental to, any recording or filing of any financing statements concerning the Collateral. The Borrower agrees that a carbon, photographic, photostatic, or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement. 4.4 Right to Inspect; Verifications. Each Agent and each Lender (or any person or persons designated by it), in its sole discretion, shall have the right to call at any place of business or property location of the Borrower or any of its Subsidiaries at any reasonable time during business hours, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from the books, records, journals, orders, receipts and any correspondence and other data of the Borrower or any of its Subsidiaries relating to the Collateral, to the business of the Borrower or such Subsidiary, or to any other transactions between the parties hereto and to discuss any of the foregoing with any of the employees, officers and directors of the Borrower or any of its Subsidiaries and with the independent accountants for the Borrower. Additionally, the Collateral Agent may, at any time and from time to time in its sole discretion, require the Borrower to verify the individual Accounts immediately upon its request therefor. 5. REPRESENTATIONS AND WARRANTIES In order to induce the Agents, the LC Issuer and the Lenders to enter into this Agreement and to make Loans hereunder, the Borrower hereby makes the following representations and warranties to the Agents and the Lenders, which shall be true and correct in all material respects on the date hereof and shall continue to be true and correct in all material respects at the time of the making of any Loan and until the Loans have been repaid in full: 5.1 Corporate Existence and Qualification. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Borrower is duly qualified as a foreign corporation in good standing in each state wherein the conduct of its business or the ownership of its property requires such qualification. Schedule 5.1 is a listing of each state where the Borrower or any of its Subsidiaries is duly qualified as a foreign corporation. 5.2 Corporate Authority; Valid and Binding Effect. The Borrower has the corporate power and authority to execute, deliver and perform under this Agreement and the other Loan Documents, and to borrow hereunder, and has taken all necessary and appropriate corporate action to authorize the execution, delivery and performance of this Agreement and such other Loan Documents. This Agreement and the other Loan Documents constitute the valid and legally binding obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms; except that enforceability may be limited by bankruptcy, insolvency and other laws affecting creditor's rights generally and except that the availability of certain remedies may be limited by general principles of equity. 5.3 No Conflict. The execution, delivery and performance by the Borrower of this Agreement and the other Loan Documents (a) are not in contravention of any provisions of Applicable Law applicable to the Borrower; (b) will not violate or result in a default under any agreement or indenture to which the Borrower is a party or by which the Borrower is bound; (c) do not contravene the Articles of Incorporation or By-laws of the Borrower; and (d) will not result in or require the creation or imposition of any Lien on any of the property or assets of the Borrower or any of its Subsidiaries other than Liens in favor of the Lender created by this Agreement or the Loan Documents. 5.4 Governmental Action. The execution, delivery and performance of this Agreement and the other Loan Documents by the Borrower do not require any registration with, consent or approval of, or any notice to, or other action to, with or by any Governmental Authority except (a) filings, consent or notices which have been obtained and a copy thereof furnished to the Lender; and (b) filings necessary to perfect the Liens granted by this Agreement and the Loan Documents. 5.5 No Litigation. Except as set forth on Schedule 5.5 hereto, there are no proceedings pending or threatened against the Borrower or any of its Subsidiaries before or by any court or administrative agency. 5.6 Solvency. After giving effect to the execution and delivery of this Agreement and the Loan Documents, the consummation of the transactions contemplated hereby and thereby and the making of each Loan and Intercompany Loans hereunder, the Borrower and each of its Subsidiaries are Solvent. 5.7 Taxes. Except as set forth on Schedule 5.7 hereof, the Borrower and each of its Subsidiaries has filed all federal, state, local and foreign tax returns, reports and estimates which are required to be filed by it and all taxes (including penalties and interest, if any) shown on such returns, reports and estimates as being due and payable or which are otherwise due and payable have been fully paid. Such tax returns properly and correctly reflect the income and taxes of the Borrower or such Subsidiary for the periods covered thereby. The federal tax identification number of Borrower and each of its Subsidiaries is set forth on Schedule 5.7 attached hereto. 5.8 Financial Information. (a) The audited consolidated financial statements of Borrower and its consolidated Subsidiaries for the fiscal year ending December 31, 1997 (the "Audited Financial Statements"), and the unaudited, interim consolidated financial statements of Borrower and its consolidated Subsidiaries for the one-month period ending January 31, 1998, including consolidated balance sheets, consolidated income statements and consolidated statements of cash flow, copies of which have been delivered by Borrower to the Administrative Agent, are true and correct in all material respects and contain no material misstatement or omission, and fairly present the consolidated financial position, assets and liabilities of Borrower and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of operations of Borrower and its consolidated Subsidiaries for the respective periods then ended, and as of the date thereof there were no liabilities of Borrower or its consolidated Subsidiaries, fixed or contingent, which are material that were not reflected in such financial statements. (b) The forecasted financial statements of Borrower and its Subsidiaries, consisting of balance sheets, income statements and cash flow statements for Borrower and its Subsidiaries, and the projected schedules of excess availability, giving effect to the consummation of the transactions contemplated by this Agreement, covering the five-year period commencing on January 31, 1997 and prepared on an annual basis (the "Projections"): (i) are based on reasonable estimates and assumptions; and (ii) reflected, as of the date prepared, and continue to reflect, as of the date of this Agreement, the reasonable estimate of Borrower of the results of operations and other information projected therein for the periods covered thereby. (c) Since the date of the financial statements referred to in Section 5.8(a), except as set forth in the financial statements referred to in Section (b), there has been no material adverse change in the consolidated assets, liabilities, financial position or results of operations of the Borrower and its consolidated Subsidiaries, and neither the Borrower nor any of its Subsidiaries have (i) incurred any obligation or liability, fixed or contingent, which would materially and adversely affect its business, operations, prospects or financial condition; (ii) incurred any Indebtedness or Capital Lease Obligations other than the Obligations; or (iii) Guaranteed the obligations of any other Person. 5.9 Title to Property. The Borrower and each of its Subsidiaries has good and marketable title to or a valid leasehold interest in all its real estate and valid and legal title to or a valid leasehold interest in all the Collateral and all of its other assets, free and clear of any and all Liens whatsoever except for Permitted Liens. 5.10 Violations of Law. Neither the Borrower nor any of its Subsidiaries is in violation of any applicable statute, rule, regulation or ordinance of any Governmental Authority, the violation of which might have a Material Adverse Effect. 5.11 ERISA. Except as disclosed on Schedule 5.11 attached hereto and incorporated herein by reference: (a) Identification of Plans. Neither the Borrower nor any ERISA Affiliate maintains or contributes to, or has maintained or contributed to, any Plan or Multiemployer Plan that is subject to regulation by Title IV of ERISA; (b) Compliance. Each Plan has at all times been maintained, by its terms and in operation, in accordance with all Applicable Laws; except for such noncompliance (when taken as a whole) that will not have a Material Adverse Effect; (c) Liabilities. Neither the Borrower nor any ERISA Affiliate is currently or, to the best knowledge of the Borrower or any ERISA Affiliate, will become subject to any liability (including withdrawal liability), tax or penalty whatsoever to any person whomsoever with respect to any Plan, including, but not limited to, any tax, penalty or liability arising under Title I or Title IV of ERISA or Chapter 43 of the Code, except such liabilities (when taken as a whole) as will not have a Material Adverse Effect; (d) Funding. The Borrower and each ERISA Affiliate has made full and timely payment of (i) all amounts required to be contributed under the terms of each Plan and Applicable Law and (ii) all material amounts required to be paid as expenses of each Plan. No Plan has any "amount of unfunded benefit liabilities" (as defined in Section 4001(a)(18) of ERISA); and (e) Insolvency; Reorganization. No Plan is insolvent (within the meaning of Section 4245 of ERISA) or in reorganization (within the meaning of Section 4241 of ERISA). 5.12 Environmental Laws. (a) The Borrower and each of its Subsidiaries has obtained all permits, licenses and other authorizations, if any, which are required under Environmental Laws for the operation of the Borrower's or such Subsidiary's business and the Borrower and each of its Subsidiaries is in compliance with all terms and conditions of required permits, licenses and authorizations, and is also in compliance with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, notifications, schedules and timetables contained in the Environmental Laws; (b) Neither the Borrower nor any of its Subsidiaries is aware of or has received notice of, the disposal or release or presence of Hazardous Substances on any of its properties, or of any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent compliance or continued compliance on the part of the Borrower or any such Subsidiary with Environmental Laws, or may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, demand, suit, Lien, proceeding, hearing, study or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any Hazardous Substance; (c) All assets of the Borrower and its Subsidiaries are free from Hazardous Substances except for Hazardous Substances used, maintained or handled by the Borrower or such Subsidiary in the ordinary course of business and the use and disposal of any and all such Hazardous Substances is effected by the Borrower or such Subsidiary in compliance with all applicable Environmental Laws; and (d) There is not pending or threatened against the Borrower or any of its Subsidiaries and neither the Borrower nor any of its Subsidiaries knows of any facts or circumstances that might give rise to, any civil, criminal or administrative action, suit, demand, claim, hearing, notice or demand letter, notice of violation, environmental Lien, investigation, or proceeding relating in any way to Environmental Laws. 5.13 Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for buying or carrying Margin Stock, and no part of the proceeds of any Loan shall be used, directly or indirectly, to purchase or carry Margin Stock. 5.14 No Default. Neither the Borrower nor any of its Subsidiaries is in default with respect to (a) any note, indenture, loan agreement, mortgage, lease, deed or other similar agreement relating to Indebtedness to which the Borrower or such Subsidiary is a party or by which the Borrower or such Subsidiary is bound or (b) any other instrument, document or agreement to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their respective properties are bound, the default of which would have a Material Adverse Effect. 5.15 Chief Executive Office; Collateral Locations. The Borrower's and each of its Subsidiaries' principal place of business, chief executive office and location of its books and records is set forth on Schedule 5.15 attached hereto and neither the Borrower, any of its Subsidiaries nor any of their respective predecessors has had any other chief executive office or principal place of business except as set forth on Schedule 5.15 during the five (5) years immediately preceding the date hereof. Schedule 5.15 attached hereto and incorporated herein by reference sets forth a true, correct and complete list of all places of business and all locations at which any Collateral is located. 5.16 Corporate and Trade or Fictitious Names. Except as set forth on Schedule 5.16 hereof, during the five (5) years immediately preceding the date of this Agreement, neither the Borrower, any of its Subsidiaries, nor any of their respective predecessors has been known as or used any corporate, trade or fictitious name other than its current corporate or individual name as such name is set forth in this Agreement. 5.17 Accounts. With regard to each Account now or hereafter shown on any schedule or aging of Accounts provided to the Lender hereunder: (a) Such Account arises or will arise under a contract between the Borrower or a Subsidiary of the Borrower and an Account Debtor in each case providing for the bona fide sale of goods or performance of services by the Borrower or its Subsidiaries in the ordinary course of its business for or on behalf of the Account Debtor except to the extent otherwise expressly indicated on such schedule or aging of accounts; (b) The Borrower or a Subsidiary of the Borrower has made delivery of the goods or has rendered the services ordered to which such Account relates and the Account Debtor has accepted such goods and/or services except to the extent otherwise expressly indicated on such schedule or aging of accounts; (c) Except to the extent otherwise expressly indicated on such schedule or aging of accounts, the amount of the face value of such Accounts is actually and absolutely owing to the Borrower or a Subsidiary of the Borrower, is not contingent for any bona fide reason, and there are no setoffs, counterclaims, disputes or deductions existing or asserted with respect thereto (except to the extent, if any, that such Account Debtor(s) may be entitled to normal trade discounts, warranties, adjustments, returns and al-lowances). (d) The Borrower or the applicable Subsidiary of the Borrower will have preserved and will continue to preserve any Liens and any rights to Liens available by virtue of the sales giving rise to such Account; (e) Such Account is free and clear of all Liens other than Permitted Liens; and (f) The Borrower or the applicable Subsidiary has full right, power and authority to collaterally assign such Account. 5.18 Adequacy of Intangible Assets. The Borrower and each of its Subsidiaries possesses all intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, and trade names and all governmental registrations and licenses reasonably necessary to continue to conduct its business as heretofore conducted by it, and all such intellectual property licenses, patents, patent applications, copyrights, Trademarks, Trademark Licenses, trademark applications, trade names, licenses and registrations which have been registered with any Governmental Authority are listed on Schedule 5.18 hereto. 5.19 Equipment. The Equipment is and shall remain in good condition, normal wear and tear excepted, meets all standards imposed by any Governmental Authority having regulatory authority over such Equipment and its use and is currently usable in the normal course of business of the Borrower or any of its Subsidiaries. 5.20 Inventory. The Inventory is and shall remain in good condition, meets all standards imposed by any Governmental Authority having regulatory authority over such goods, their use and/or sale, is either currently usable or currently salable in the normal course of the Borrower's business and is not subject to any output contract or similar agreement between the Borrower and any other Person. 5.21 Investment Property. Schedule 5.21 is a complete list of all Subsidiaries, Investment Property and other Investments in any Person, including but not limited to, all interests in any partnership or joint venture. Except as otherwise disclosed on Schedule 5.21, all shares of stock in any corporation held by Borrower or any of its Subsidiaries are evidenced by stock certificates issued in the name of Borrower or such Subsidiary and all other Investment Property of Borrower or any Subsidiary is held directly in the name of Borrower or such Subsidiary and is not held in any brokerage or similar account, in the name of any financial institution or in any nominee name. 5.22 Indebtedness. Schedule 5.22 hereto is a complete and correct list, as of the date of this Agreement, of each credit agreement, loan agreement, indenture, note purchase agreement, guarantee, Interest Hedge Agreement or other arrangement providing for or otherwise relating to any Indebtedness to, or guarantee by, the Borrower or any of its Subsidiaries and the aggregate principal or face amount outstanding as of the date hereof or which may become outstanding under each such arrangement is correctly described in said Schedule 5.22. The Borrower has no Indebtedness other than as set forth on Schedule 5.22 or as permitted by Section 7.2 hereof. 5.23 Existing Liens. Schedule 5.23 hereto is a complete and correct list, as of the date of this Agreement, of each Lien existing on the date hereof securing Indebtedness and the aggregate principal amount of Indebtedness secured by each such Lien is correctly described in such Schedule 5.22. 5.24 Trade Relations. There exists no actual nor, to the best of the Borrower's knowledge, threatened limitation of the business relationship of the Borrower or any of its Subsidiaries with any material customer, supplier, landlord or with any company whose contracts or projected contracts with the Borrower or such Subsidiary could be material to the operations of the Borrower or such Subsidiary; and there exists no condition or state of facts or circumstances which could have a Material Adverse Effect on the Borrower or any of its Subsidiaries or prevent the Borrower or any of its Subsidiaries from conducting its business after the consummation of the transactions contemplated by this Agreement as such business is conducted or proposed to be conducted in the Projection and other information furnished to the Administrative Agent by the Borrower or such Subsidiary. 5.25 Broker's or Finder's Fees. No broker's or finder's fees or commissions have been incurred or will be payable by the Borrower or any of its Subsidiaries to any Person in connection with the transactions contemplated by this Agreement. 5.26 Security Interest. This Agreement creates a valid Lien on the Collateral securing payment of the Obligations, subject only to Permitted Liens, and all filings and other actions necessary or desirable to perfect and protect such Lien have been taken, and the Collateral Agent has a valid and perfected first priority Lien in the Collateral subject only to Permitted Liens. 5.27 Regulatory Matters. Neither the Borrower nor any of its Subsidiaries is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate Commerce Act or any other federal or state statute or regulation which limits its ability to incur Indebtedness or its ability to consummate the transactions contemplated hereby. 5.28 Disclosure. Neither this Agreement nor any other instrument, document, agreement, financial statement or certificate furnished to the Lender by or on behalf of the Borrower or any of its Subsidiaries in connection herewith or therewith contains an untrue statement of a material fact or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading or omits to state any fact which may in the future have a Material Adverse Effect. 5.29 Burdensome Restrictions. Neither any contract, lease, indenture, agreement or other instrument, or corporate restriction, judgment, decree, or order to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries is bound, nor any provision of Applicable Law, has or can reasonably be expected to have a Material Adverse Effect. 5.30 Senior Indebtedness. The Obligations constitute "Senior Indebtedness," as such term is defined in each of the subordination agreements relating to the Subordinated Seller Notes. 5.31 Shell Subsidiaries. As of the date hereof, each of ITP No. 5, Inc., a Delaware corporation; ITP No. 6, Inc., a Delaware corporation; ITP No. 7, Inc., a Delaware corporation; ITP No. 8, Inc., a Delaware corporation; and ITP No. 9, Inc., a Delaware corporation, (a) is a wholly-owned Subsidiary of the Borrower; (b) was formed solely for the purpose of effecting a proposed Acquisition by the Borrower, which Acquisition has not yet been consummated; (c) does not own or hold any material assets or properties; and (d) has neither conducted any business nor engaged in any activities other than the business of negotiating and closing the Acquisition to be entered into by it. 6. AFFIRMATIVE COVENANTS The Borrower hereby covenants to the Agents and the Lenders that from and after the date hereof, and until the termination of this Agreement in accordance with Section 2.7 hereof, unless the Majority Lenders otherwise consent in writing: 6.1 Records Respecting Collateral; Lockbox or Blocked Account Arrangement. The Borrower shall, and shall cause each of its Subsidiaries to, keep all records with respect to the Collateral at its respective office set forth on Schedule 5.15 hereof and not remove such records from such addresses without the prior written consent of the Collateral Agent and, upon request of the Collateral Agent or the Majority Lenders, following the occurrence of an Event of Default, enter into such lockbox or blocked account arrangement with respect to collection of the Accounts and execute and deliver such documents in connection therewith as Collateral Agent or the Majority Lenders may reasonably require. 6.2 Reporting Requirements. The Borrower shall, and shall cause each of its Subsidiaries to, furnish or cause to be furnished to the Agents and each Lender: (a) As soon as practicable, and in any event within forty-five (45) days after the end of each month, interim unaudited financial statements of the Borrower and its consolidated Subsidiaries, prepared on a consolidated basis for the Borrower and its consolidated Subsidiaries, including a balance sheet, income statements and statements of cash flow, for the month and year-to-date period then ended, prepared in accordance with GAAP and certified as to truth and accuracy thereof by the chief financial officer of the Borrower; (b) As soon as available, and in any event within ninety (90) days after the end of each fiscal year, audited consolidated annual financial statements of the Borrower and its consolidated Subsidiaries, including consolidated balance sheets, consolidated income statements and consolidated statements of cash flow for the fiscal year then ended, prepared in accordance with GAAP, in comparative form and accompanied by the unqualified opinion of a nationally recognized firm of independent certified public accountants retained by the Borrower and its Subsidiaries and acceptable to the Administrative Agent and the Majority Lenders; (c) Together with the annual financial statements referred to in clause (b) above, a statement from such independent certified public accountants that, in making their examination of such financial statements, they obtained no knowledge of any Default or Event of Default or, in lieu thereof, a statement specifying the nature and period of existence of any such Default or Event of Default disclosed by their examination; (d) Not later than the first day of each fiscal year, (i) a projected operating budget for Borrower and its Subsidiaries for such fiscal year, consisting of projected monthly balance sheets, income statements and a statement of cash flows and (ii) a list of the beginning and ending dates of each monthly and quarterly accounting periods of such fiscal year; (e) Together with the financial statements referred to in clauses (a) and (b) above, (i) a compliance certificate of the chief financial officer of the Borrower, in substantially the forms of Exhibit J hereto (the "Compliance Certificate"), setting forth the calculations for determining compliance with the financial covenants set forth in Article 8 hereof and certifying that such calculations are true and accurate and that, to the best of his knowledge, no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto; and (ii) a Borrowing Availability Certificate, in substantially the form of Exhibit K attached hereto (a "Borrowing Availability Certificate"), setting forth the Adjusted Cash Flow of the Borrower as of the end of the immediately preceding month and signed by the chief financial officer of the Borrower; provided, however, that the Borrower may, at its option, in connection with its request for approval of an Acquisition pursuant to Section 7.5 hereof, deliver to the Administrative Agent a Borrowing Availability Certificate, prepared on a pro forma basis, giving effect to such Acquisition; (f) As soon as available, and in any event within thirty (30) days after the end of each month, an accounts receivable aging, showing separately for the Borrower and each Subsidiary, in summary form the aggregate dollar value of the Accounts of each and indicating the aggregate value of the Accounts that are past due and whether such Accounts are thirty (30), sixty (60) or ninety (90) or more days past due and containing such other information regarding such Accounts as the Lender may request, all as of the last day of the preceding month; (g) Promptly after the sending or filing thereof, as the case may be, copies of any definitive proxy statements, financial statements or reports which the Borrower sends to its shareholders and copies of any regular periodic and special reports or registration statements which the Borrower files with the Securities and Exchange Commission (or any Governmental Authority substituted therefor), including, but not limited to, all Form 10-K and Form 10-Q reports, if any, or any report or registration statement which the Borrower files with any national securities exchange; (h) At least fifteen (15) Business Days prior to the time any consent by the Majority Lenders will be necessary, the Borrower shall furnish to the Agents and the Lenders all pertinent information regarding any proposed Acquisition by the Borrower hereunder which is reasonably necessary or appropriate to permit the Lenders to evaluate such Acquisition in a manner consistent with prudent banking standards; and (i) Such other information respecting the condition or operations, financial or otherwise, of the Borrower and its Subsidiaries as the Lenders may from time to time reasonably request. 6.3 Tax Returns. The Borrower shall, and shall cause each of its Subsidiaries to, file all federal, state and local tax returns and other reports that the Borrower and its Subsidiaries are required by law to file, maintain adequate reserves for the payment of all taxes, assessments, governmental charges and levies imposed upon its income, or its profits, or upon any property belonging to it, and pay and discharge all such taxes, assessments, governmental charges and levies prior to the date on which penalties attach thereto, except where the same may be contested in good faith by appropriate proceedings and for which adequate reserves have been established. 6.4 Compliance With Laws. The Borrower shall, and shall cause each of its Subsidiaries to, comply with all laws, statutes, rules, regulations and ordinances of any Governmental Authority applicable to the Borrower or its Subsidiaries, including, without limitation, any such laws, statutes, rules, regulations or ordinances regarding the collection, payment, and deposit of employees' income, unemployment, and Social Security taxes and with respect to pension liabilities, the violation of which might have a Material Adverse Effect. 6.5 Environmental Laws. The Borrower shall, and shall cause each of its Subsidiaries to, comply with all Environmental Laws and, in the event of any "release" or "threatened release" of any Hazardous Substance onto, at or under the property of any the Borrower or any of its Subsidiaries which requires or may require notification, response, assessment, investigation or remedial action pursuant to any Environmental Law, notify the Lender and all appropriate Governmental Authorities thereof, and proceed with due diligence and, at the cost and expense of the Borrower or such Subsidiary, to respond appropriately, in accordance with all requirements of the Environmental Laws. 6.6 ERISA. The Borrower shall, and shall cause each ERISA Affiliate to: (a) At all times make prompt payment of contributions required to meet the minimum funding standards set forth in Sections 302 and 305 of ERISA with respect to each Plan and otherwise comply with ERISA and all rules and regulations promulgated thereunder; (b) Promptly after the occurrence thereof with respect to any Plan, or any trust established thereunder, notify the Administrative Agent and the Lenders of (i) a "reportable event" described in Section 4043 of ERISA and the regulations issued from time to time thereunder (other than a "reportable event" not subject to the provisions for 30-day notice to the PBGC under such regulations), or (ii) any other event which could subject the Borrower or any ERISA Affiliate to any material tax, penalty or liability under Title I or Title IV of ERISA or Chapter 43 of the Code; (c) At the same time and in the same manner as such notice must be provided to the PBGC, or to a Plan participant, beneficiary or alternative payee, give the Administrative Agent and the Lenders any notice required under Section 101(d), 302(f)(4), 303, 307, 4041(b)(1)(A) or 4041(c)(1)(A) or ERISA or under Section 401(a)(29) or 412 of the Code with respect to any Plan; (d) Furnish to the Administrative Agent or any Lender, promptly upon the request of the Administrative Agent or such Lender, (i) true and complete copies of any and all documents, government reports and determination or opinion letters for any Plan; and (ii) a current statement of withdrawal liability, if any, for each Multiemployer Plan; and (e) Furnish to the Administrative Agent or any Lender, promptly upon the request of the Administrative Agent or such Lender therefor, such additional information concerning any Plan as may be reasonably requested. 6.7 Books and Records. The Borrower shall, and shall cause each of its Subsidiaries to, keep adequate records and books of account with respect to its business activities in which proper entries are made in accordance with GAAP reflecting all its financial transactions. 6.8 Notifications to the Administrative Agent and the Lenders. The Borrower shall notify the Administrative Agent and the Lenders immediately by telephone (with each such notice to be confirmed in writing within three (3) Business Days): (a) upon the Borrower's learning thereof, of any litigation affecting the Borrower or any of its Subsidiaries claiming damages of $100,000 or more, individually or when aggregated with other litigation pending against the Borrower or its Subsidiaries, whether or not covered by insurance, and of the threat or institution of any suit or administrative proceeding against the Borrower or any of its Subsidiaries which, if adversely determined, might have a Material Adverse Effect, and establish such reasonable reserves with respect thereto as the Majority Lender may request in accordance with GAAP; (b) upon occurrence thereof, of any Default or Event of Default hereunder; (c) upon occurrence thereof, of any event or condition which could have a Material Adverse Effect; and (d) upon the occurrence thereof, of the Borrower's or any of its Subsidiaries' default under (i) any note, indenture, loan agreement, mortgage, lease, deed or other similar agreement relating to any Indebtedness of the Borrower or such Subsidiary or (ii) any other instrument, document or agreement to which the Borrower or any of its Subsidiaries is a party or by which the Borrower or any of its Subsidiaries or any of their respective properties is bound, the default of which could have a Material Adverse Effect. 6.9 Insurance. The Borrower shall, and shall cause each of its Subsidiaries to: (a) keep all of its property insured by insurance companies (i) acceptable to the Majority Lenders; and (ii) licensed to do business in all jurisdictions in which the Collateral is located against loss or damage by fire or other risk usually insured against under extended coverage endorsement and theft, burglary, and pilferage, together with such other hazards as the Majority Lenders may reasonably from time to time request, in amounts satisfactory to the Majority Lenders and naming the Collateral Agent as loss payee thereon pursuant to a loss payee clause satisfactory to the Collateral Agent; (b) maintain at all times liability insurance coverage against such risks and in such amounts as are customarily maintained by others in similar businesses, such insurance to be carried by insurance companies (i) acceptable to the Majority Lenders and (ii) licensed to do business in the states in which the Borrower and its Subsidiaries conduct business; and (c) deliver certificates of insurance for such policy or policies to the Collateral Agent, containing endorsements, in form satisfactory to the Lenders, providing that the insurance shall not be cancelable, except upon thirty (30) days' prior written notice to the Collateral Agent. In the event of any termination or notice of non-payment by any insurer with respect to any policy or any lapse in the coverage thereunder, the Borrower shall cause such insurer to give prompt written notice to Johanna Connor, Senior Vice President, Creditanstalt Corporate Finance, Inc., 2 Greenwich Plaza, 4th Floor, Greenwich, Connecticut 06830 of the occurrence of such termination, nonpayment or lapse. 6.10 Maintenance of Intellectual Property. The Borrower shall, and shall cause each of its Subsidiaries to, keep all General Intangibles in full force and effect except for immaterial General Intangibles allowed to lapse by the Borrower or any of its Subsidiaries in the ordinary course of its business and any other General Intangible for which the Borrower or any of its Subsidiaries has obtained a substantially similar substitution or the lapse of which, because of such substitution, will not have a Material Adverse Effect on the business or operations of the Borrower or such Subsidiary, as the case may be, and maintain all of its other property necessary or useful in the proper conduct of its respective business in good working condition, ordinary wear and tear excepted. 6.11 Preservation of Corporate Existence. The Borrower shall, and shall cause each of its Subsidiaries to, preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign corporation in each jurisdiction in which such qualification is necessary in view of its business and operations or the ownership of its properties. 6.12 Equipment. The Borrower shall, and shall cause each of its Subsidiaries to, keep and maintain the Equipment in good operating condition, reasonable wear and tear excepted, repair and make all necessary replacements, renewals, additions or improvements thereto so that the value and operating efficiency thereof shall at all times be maintained and preserved and not permit any item of Equipment to become a fixture to real estate or accession to other personal property unless the Collateral Agent has a first priority Lien on such real estate or other personal property. The Borrower shall, immediately on demand therefor by the Collateral Agent, deliver to the Collateral Agent any and all existing evidence of ownership of any of the Equipment (including, without limitation, certificates of title and applications for title, together with any necessary applications to have the Collateral Agent's Lien noted thereon, in the case of vehicles). 6.13 Other Indebtedness. The Borrower shall, and shall cause each of its Subsidiaries to, maintain all of its Indebtedness in whatsoever manner incurred, including, but not limited to, Indebtedness for borrowed money or for services or goods purchased, in a current status. 6.14 Year 2000 Compliance. Borrower and each of its Subsidiaries shall cause, on or prior to December 31, 1998 and at all times thereafter, all software and other processing capabilities of Borrower and its Subsidiaries to have the ability to correctly interpret and manipulate all data, in whatever form, including, but not limited to, printed form, screen displays, financial records, calculations and loan-related data, so as to avoid errors in processing that may otherwise occur because of the inability of the software or other processing capabilities to recognize accurately the year 2000 or subsequent dates, except to the extent the failure to have such ability would not be reasonably expected to have a Material Adverse Effect. 6.15 Assignment of Leasehold Interests. Upon request of the Collateral Agent, execute and deliver to the Collateral Agent (a) such fee mortgages, leasehold mortgages or other appropriate security instruments, as and in such form as the Collateral Agent requests, in respect of any real property owned or leased by the Borrower or any Subsidiary, and (b) any and all environmental assessments, surveys, title insurance policies, opinions, certificates, instruments, documents and agreements as the Collateral Agent or the Majority Lenders may reasonably request in connection therewith. 6.16 Additional Documents. Upon formation or Acquisition by the Borrower or any Subsidiary of the Borrower of any new Subsidiary, the Borrower shall deliver, or cause to be delivered to the Collateral Agent, for the benefit of the Lenders, each in form and substance satisfactory to the Collateral Agent, (a) an addendum to the Master Subsidiary Guaranty executed by such new Subsidiary, guaranteeing the Obligations, (b) an amendment to the Stock Pledge Agreement or an addendum to the Master Subsidiary Pledge Agreement, as applicable, pledging the ownership interest in such new Subsidiary, (c) an addendum to the Master Subsidiary Security Agreement executed by such new Subsidiary, and (d) all other instruments, documents or agreements reasonably necessary or desirable to create, evidence or perfect a lien on or security interest in favor of the Collateral Agent, for the benefit of the Lenders, in the assets of such new Subsidiary and/or to reaffirm the obligations of the Borrower and its Subsidiaries; provided, however, that the Borrower may cause any newly-formed Subsidiary to delay executing and delivering the documents required by this Section 6.16 until the closing of an Acquisition by such Subsidiary so long as (i) such Subsidiary was formed for the sole purpose of consummating an Acquisition that is subject to the terms of Section 7.5 hereof; (ii) such Subsidiary has no material assets or properties; and (iii) such Subsidiary conducts no business and engages in no activities other than the business of negotiating and closing an Acquisition. 6.17 Upstream Payment of Dividends and Distributions. In the event that any wholly owned Subsidiary receives a dividend or other distribution (other than a dividend paid in stock) from a Subsidiary of such Subsidiary, the Subsidiary receiving such dividend or other distribution shall promptly, and in any event within ten (10) days of its receipt of such dividend or distribution, pay such dividend or distribution to the Borrower. 7. NEGATIVE COVENANTS The Borrower hereby covenants with the Agents and the Lenders that from and after the date hereof and until the termination of this Agreement in accordance with Section 2.7 hereof, without the prior written consent of the Majority Lenders: 7.1 Liens. The Borrower shall not, and shall not permit any of its Subsidiaries to, create, incur, assume, or suffer to exist any Lien of any kind in any of the Collateral or their other assets other than Permitted Liens. 7.2 Indebtedness. The Borrower shall not, and shall not permit any of its Subsidiaries to, incur, assume, or suffer to exist any Indebtedness except for (a) the Obligations; (b) Indebtedness listed on Schedule 5.22; (c) other purchase money Indebtedness or unsecured Indebtedness in an aggregate principal amount which, when aggregated with the aggregate outstanding principal amount of the Indebtedness on Schedule 5.22 which is not Subordinated Debt, does not exceed $3,500,000; and (d) the Subordinated Debt. 7.3 Asset Sales. The Borrower shall not, and shall not permit any of its Subsidiaries to, sell, lease, transfer or otherwise dispose of any or all of the Collateral or any interest therein or any of their other assets other than (a) the sale of Inventory in the ordinary course of business; and (b) the sale of other assets no longer used or usable in the business of the Borrower or such Subsidiary and which have a value which does not exceed $250,000 in the aggregate for all such assets so sold. 7.4 Guaranties. The Borrower shall not, and shall not permit any of its Subsidiaries to, Guarantee the obligations of any other Person except (a) pursuant to the Master Subsidiary Guaranty and the Intercompany Guaranties and (b) by endorsement of negotiable instruments for deposit or collection and similar transactions in the ordinary course of business. 7.5 Investments and Acquisitions. The Borrower shall not, and shall not permit any of its Subsidiaries to, make any Investment or Acquisitions except for the following: (a) The Borrower may make Intercompany Loans to any Subsidiary of the Borrower pursuant to an Intercompany Loan and Security Agreement, in accordance with the terms of such Intercompany Loan and Security Agreement, for the working capital purposes of such Subsidiary; provided, that, as a condition to the making of any such advance to a Subsidiary pursuant to an Intercompany Loan Agreement, all requirements of Section 2.4 hereof are satisfied to the satisfaction of the Administrative Agent and the Collateral Agent; provided, further, that at the time of each such Intercompany Loan, both before and after giving effect thereto, there does not exist a Default or an Event of Default hereunder. (b) Borrower or any Subsidiary of Borrower may make intercompany loans to other Subsidiaries of Borrower other than out of proceeds from Loans. The Borrower acknowledges and agrees that, without limiting any right of approval granted to the Agents or the Lenders or any of them elsewhere in this Agreement or the Loan Documents, any approval to an Acquisition required of the Majority Lenders may be given or withheld by the Majority Lenders in their discretion. The Agents and the Lenders agree to respond to any request by the Borrower for approval of any proposed Acquisition as promptly as practical after receiving all pertinent information regarding such proposed Acquisition and the completion of all due diligence deemed necessary by the Lenders in order to evaluate such Acquisition in a manner consistent with prudent banking standards. 7.6 Prohibition of Fundamental Changes. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) or make any substantial change in the basic type of business conducted by the Borrower or such Subsidiary as of the date hereof except that: (a) The Borrower may merge with any Person to consummate an Acquisition permitted by, or consented to by the Majority Lenders pursuant to, Section 7.5 hereof; provided, however, that (i) the Borrower is the corporation surviving such merger and (ii) there then exists no Default or Event of Default nor any event or conditions which, with the consummation of such merger, would constitute a Default or Event of Default. (b) Any Subsidiary of the Borrower may be merged or consolidated with or into: (i) the Borrower if the Borrower shall be the continuing or surviving corporation; or (ii) any other Person to consummate an Acquisition permitted, or consented to by the Majority Lenders pursuant to, by Section 7.5 hereof; provided that, after giving effect to such merger or consolidation, the Person surviving the merger or consolidation is a wholly-owned Subsidiary of Borrower; or (iii) any other Subsidiary; provided that if any such transaction shall be between a Subsidiary and a wholly-owned Subsidiary, the wholly-owned Subsidiary shall be the continuing or surviving corporation; (c) Any wholly-owned Subsidiary of Borrower may be dissolved into its parent corporation. 7.7 Issuance of Stock. The Borrower shall not, and shall not permit any of its Subsidiaries to, issue any shares of Capital Stock or other ownership interests in the Borrower or any of its Subsidiaries, except that the Borrower may issue (a) shares of common stock of a class currently authorized by Borrower's Certificate of Incorporation; (b) shares of Series B Preferred Stock of the Borrower; and (c) additional shares of Borrower's Series A Preferred Stock as dividends on outstanding shares of Series A Preferred Stock as provided in the terms of said Series A Preferred Stock as in effect on the date hereof. 7.8 Fiscal Year. The Borrower shall not, and shall not permit any of its Subsidiaries to, change its fiscal year end from December 31. 7.9 ERISA. The Borrower shall not, and shall not permit any of its Subsidiaries to, take, or fail to take, or permit any ERISA Affiliate to take, or fail to take, any action with respect to a Plan including, but not limited to, (a) amending any Plan, (b) terminating or withdrawing from any Plan, or (c) incurring an amount of unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA, where such action or failure could have a Material Adverse Effect, result in a Lien on the property of the Borrower or any of its Subsidiaries or require the Borrower or any of its Subsidiaries to provide any security. 7.10 Relocations; Use of Name. The Borrower shall not, and shall not permit any of its Subsidiaries to, relocate its executive offices, open new places of business or relocate existing places of business; maintain any Collateral or records with respect to Collateral at any other locations than those locations presently kept or maintained, as set forth on Schedule 5.15 hereto; or use any corporate name (other than its own) or any fictitious name, in each case, except upon thirty (30) days prior written notice to the Collateral Agent and after the delivery to the Collateral Agent of financing statements, if required by the Collateral Agent, in form satisfactory to the Collateral Agent. 7.11 Arm's-Length Transactions. The Borrower shall not, and shall not permit any of its Subsidiaries to, enter into any transaction, including, without limitation, the purchase, sale or exchange of property or the rendering of any service or the payment of management or other service fees, with any Affiliate except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms which are fully disclosed to the Administrative Agent and the Lenders in writing and which are no less favorable to the Borrower than those which would prevail in a comparable arm's-length transaction with a Person not an Affiliate. 7.12 Amendments. The Borrower shall not (a) amend, supplement or otherwise modify the Preferred Stock and Warrant Purchase Agreement or the Subordinated Seller Notes or (b) prepay any Subordinated Debt; provided, however, that Borrower may prepay not more than $11,000,000 of Subordinated Seller Notes concurrently with the closing of a offering of its common stock, registered under the Securities Act of 1933, as amended, resulting in cash proceeds, net of underwriter commissions and discounts, to the Company of not less than $80,000,000. 8. FINANCIAL COVENANTS The Borrower hereby covenants with the Agents and the Lenders that from and after the date hereof and until the termination of this Agreement in accordance with Section 2.7 hereof unless the Majority Lenders otherwise consent in writing: 8.1 Net Worth. The Borrower shall maintain a Net Worth at all times of not less than the sum of (i) $6,427,526, plus (ii) one hundred percent (100%) of the amount by which the Borrower's shareholders' equity is increased as a result of the issuance of equity securities, plus (iii) seventy-five percent (75%) of Net Income from the period beginning on January 1, 1998 through the date of determination. 8.2 Leverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below a Leverage Ratio for each such quarter of not greater than the ratio set forth below opposite the applicable period during which such quarter occurs: Applicable Period Ratio Effective Date - 06/30/98 6.0:1.0 07/01/98 -06/30/99 5.5:1.0 At all times thereafter 5.0:1.0 8.3 Senior Debt Leverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below a Senior Debt Leverage Ratio for each such quarter of not greater than the ratio set forth below opposite the applicable period during which such quarter occurs: Applicable Period Ratio Effective Date - 06/30/98 4.0:1.0 07/01/98 - 06/30/99 3.5:1.0 At all times thereafter 3.0:1.0 8.4 Interest Coverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below, an Interest Coverage Ratio for such fiscal quarter of not less than the ratio set forth below opposite each such applicable period: Applicable Period Ratio Effective Date - 06/30/98 2.00:1.00 07/01/98 - 06/30/99 2.50:1.00 07/01/98 - 12/31/00 2.75:1:00 At all times thereafter 3.00:1.00 8.5 Dividends. Neither the Borrower nor any of its Subsidiaries shall declare or pay any dividends on, or make any distribution with respect to, the shares of any class of their Capital Stock, or purchase, redeem, acquire, defease or retire any shares of their Capital Stock, or take any action having an effect equivalent to the foregoing except (i) Borrower may declare and pay dividends to holders of Series A Preferred Stock payable solely in additional shares of Series A Preferred Stock and (ii) any Subsidiary of the Borrower may declare and pay dividends to the Borrower or to any wholly-owned Subsidiary of the Borrower. 9. EVENTS OF DEFAULT The occurrence of any of the following events or conditions shall constitute an Event of Default hereunder: 9.1 Obligations. The Borrower shall fail to make any payments of principal of or interest on any Loan or any other Obligation when due. 9.2 Misrepresentations. The Borrower or any of its Subsidiaries shall make any representation or warranty in this Agreement or any of the other Loan Documents or in any certificate or statement furnished at any time hereunder or in connection with this Agreement or any of the other Loan Documents which proves to have been untrue or misleading in any material respect when made or furnished and which continues to be untrue or misleading in any material respect. 9.3 Covenants. The Borrower or any of its Subsidiaries shall default in the observance or performance of any covenant in Article 6 hereof (other than Section 6.8 hereof) applicable to the Borrower or such Subsidiary and such default continues for thirty (30) days after notice thereof. 9.4 Other Covenants. The Borrower or any of its Subsidiaries shall default in observance or performance of any other covenant applicable to the Borrower or such Subsidiary under this Agreement or any of the other Loan Documents. 9.5 Other Debts. (a) The Borrower or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any of its Indebtedness, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace or cure period, if any, specified in the agreement, mortgage, indenture or instrument relating to such Indebtedness; or (b) any other event shall occur or condition shall exist under any agreement, mortgage, indenture or instrument relating to any such Indebtedness and shall continue after the applicable grace or cure period, if any, specified in such agreement, mortgage, indenture or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness; or (c) any such Indebtedness shall be accelerated or otherwise declared to be due and payable prior to the stated maturity thereof, or (d) any such Indebtedness shall be required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof. 9.6 Tax Lien. A notice of Lien, levy or assessment is filed of record with respect to all or any assets of the Borrower or any of its Subsidiaries by the United States or any other Governmental Authority, including, without limitation, the PBGC, which adversely affects the priority of the Liens granted to the Collateral Agent hereunder or under any of the other Loan Documents. 9.7 ERISA. The occurrence of any of the following events: (a) the happening of a Reportable Event with respect to any Plan; (b) the disqualification or involuntary termination of a Plan for any reason; (c) the voluntary termination of any Plan while such Plan has a funding deficiency (as determined under Section 412 of the Code); (d) the appointment of a trustee by an appropriate United States district court to administer any such Plan; (e) the institution of any proceedings by the PBGC to terminate any such Plan or to appoint a trustee to administer any such Plan; (f) the failure of the Borrower to notify the Administrative Agent promptly upon receipt by the Borrower or any of its ERISA Affiliates of any notice of the institution of any proceeding or other actions which may result in the termination of any such Plan. 9.8 Voluntary Bankruptcy. The Borrower or any of its Subsidiaries shall: (a) file a voluntary petition or assignment in bankruptcy or a voluntary petition or assignment or answer seeking liquidation, reorganization, arrangement, readjustment of its debts, or any other relief under the Bankruptcy Code, or under any other act or law pertaining to insolvency or debtor relief, whether State, Federal, or foreign, now or hereafter existing; (b) enter into any agreement indicating consent to, approval of, or acquiescence in, any such petition or proceeding; (c) apply for or permit the appointment, by consent or acquiescence, of a receiver, custodian or trustee of itself or themselves or for all or a substantial part of its or their property; (d) make an assignment for the benefit of creditors; or (e) be unable or shall fail to pay its or their debts generally as such debts become due, admit in writing its or their inability or failure to pay its or their debts generally as such debts become due, or otherwise cease to be Solvent. 9.9 Involuntary Bankruptcy. There occurs (a) a filing or issuance against the Borrower or any of its Subsidiaries an involuntary petition in bankruptcy or seeking liquidation of the Borrower or such Subsidiary, reorganization, arrangement, readjustment of its or their debts or any other relief under the Bankruptcy Code, or under any other act or law pertaining to insolvency or debtor relief, whether State, Federal or foreign, now or hereafter existing and either such proceeding shall continue in effect for a period of sixty (60) days or more or an order for relief against the Borrower or any of its Subsidiaries shall be entered therein; (b) the involuntary appointment of a receiver, liquidator, custodian or trustee of the Borrower or any of its Subsidiaries or for all or a substantial part of its or their property; or (c) the issuance of a warrant of attachment, execution or similar process against all or any substantial part of the property of the Borrower or any of its Subsidiaries. 9.10 Suspension of Business. The suspension of the transaction of the usual business of the Borrower or any of its Subsidiaries or the dissolution of the Borrower. 9.11 Judgments. Any judgment, decree or order for the payment of money which, when aggregated with all other judgments, decrees or orders for the payment of money pending against the Borrower or any of its Subsidiaries exceeds the sum of One Hundred Thousand Dollars ($100,000), shall be rendered against the Borrower or any of its Subsidiaries and remain unsatisfied and in effect for a period of sixty (60) consecutive days or more without being vacated, discharged, satisfied or stayed or bonded pending appeal. 9.12 RICO. The Borrower, any of its Subsidiaries, or any of their respective directors, shareholders or executive officers shall be indicted under the Racketeer Influenced and Corrupt Organizations Act of 1970 (18 U.S.C. Section 1961 et seq.) or the Majority Lenders otherwise reasonably believe in good faith that all or any portion of the Borrower's or any of its Subsidiaries' assets are subject to forfeiture pursuant to Applicable Law. 9.13 Failure of Security. At any time (a) Liens in favor of the Collateral Agent contemplated by the Loan Documents shall, at any time, for any reason (except by reason of an affirmative act or omission of the Collateral Agent), be invalidated or otherwise cease to be in full force and effect; (b) such Liens shall be subordinated or shall not have the priority contemplated by this Agreement or the other Loan Documents; or (c) the Borrower or other Borrower under any such Loan Document seeks to repudiate its or his obligations thereunder. 9.14 Guaranty. At any time, for any reason other than the consent of the Majority Lenders, any guaranty of the Obligations ceases to be in full force and effect in any material respect or guarantor thereunder seeks to repudiate its obligations thereunder and the Liens intended to be created thereby or in connection therewith are, or such guarantor seeks to render such Liens, invalid and unperfected. 9.15 Intercompany Loan Documents. There shall occur any event of default under any one or more of the Intercompany Loan and Security Agreements or Intercompany Guaranties or any other Intercompany Loan Document, or the Borrower shall amend, modify, or otherwise change any Intercompany Loan and Security Agreement, Intercompany Guaranty or any other Intercompany Loan Document, fail to exercise any of its rights, privileges or option thereunder, release any party thereto from the performance of such party's obligations thereunder, or grant any waiver, consent or indulgence thereunder to any other party thereto, except where such amendment, modification or change would not have an adverse effect upon the Collateral Agent's rights therein. 9.16 Management. Daniel J. Klein and Jamie E. Blech cease to be the chief executive officer and president, respectively, of the Borrower and the vacancy so created is not filled by another Person reasonably acceptable to the Majority Lenders. 9.17 Change of Control. Either (a) a Person or "group" (within the meaning of the Securities Exchange Act of 1934), other than Daniel J. Klein and Jamie E. Blech, acquires or obtains beneficial ownership of securities (including options) of the Borrower representing a percentage of the ordinary voting power of the Borrower that is greater than the percentage of the ordinary voting power represented by the shares of Capital Stock owned, beneficially and of record, with power to vote, by Daniel J. Klein and Jamie E. Blech, or (b) there shall occur a change in the composition of the Board of Directors of the Borrower such that the current directors (or directors designated or approved by such directors) shall not have a majority of the ordinary voting power of the Borrower. 9.18 Exercise of Put Option. The Borrower (a) shall default in the observance or performance of any covenant applicable to Borrower under the Preferred Stock and Warrant Purchase Agreement, and (b) such default results in the exercise of or an attempt at exercising any Put Option (as such term is defined in Section 4.05 of the Stockholder Agreement). 10. REMEDIES Upon the occurrence or existence of any Event of Default, and during the continuation thereof, without prejudice to the rights of the Agents or the Lenders to enforce their claims against the Borrower for damages or failure by the Borrower to fulfill any of the obligations hereunder, the Agents and the Lenders shall have the following rights and remedies, in addition to any other rights and remedies available to the Agents and the Lenders at law, in equity or otherwise: 10.1 Default Rate. At the election of the Administrative Agent, evidenced by written notice to the Borrower, the outstanding principal balance of the Obligations, and to the extent permitted by Applicable Law, accrued and unpaid interest thereon, shall bear interest at the Default Rate until paid in full. 10.2 Termination; Acceleration of the Obligations. In the event of an Event of Default set forth in Sections 9.8 or 9.9 hereof, the Commitment shall automatically and immediately terminate and in the event of any other Event of Default, the Majority Lenders, at their option, may terminate the Commitment, whereupon in either case all of the Obligations shall become immediately due and payable, without presentment, demand, protest, notice of non-payment or any other notice required by law relative thereto, all of which are hereby expressly waived by the Borrower, anything contained herein to the contrary notwithstanding. 10.3 Set-Off. The right of each Lender to set-off, without notice to the Borrower or any of its Subsidiaries, any and all deposits at any time credited by or due from such Lender to the Borrower or such Subsidiary, whether in a general or special, time or demand, final or provisional account or any other account or represented by a certificate of deposit and whether or not unmatured or contingent against any or all of the Obligations of the Borrower or such Subsidiary, now existing or hereafter arising, whether or not such Lender shall have made any demand under this Agreement or any of the Loan Documents. 10.4 Rights and Remedies of a Secured Party. All of the rights and remedies of a secured party under the UCC or under other Applicable Law, all of which rights and remedies shall be cumulative, and none of which shall be exclusive, to the extent permitted by law, in addition to any other rights and remedies contained in this Agreement, and in any of the other Loan Documents. 10.5 Take Possession of Collateral. The right of the Collateral Agent's to (a) enter upon the premises of the Borrower or any of its Subsidiaries, or any other place or places where the Collateral is located and kept, through self-help and without judicial process, without first obtaining a final judgment or giving the Borrower or any of its Subsidiaries notice and opportunity for a hearing on the validity of the Collateral Agent's claim and without any obligation to pay rent to the Borrower or any of its Subsidiaries, and remove the Collateral therefrom to the premises of the Collateral Agent or any agent of the Collateral Agent, for such time as the Collateral Agent may desire, in order to effectively collect or liquidate the Collateral; and/or (b) require the Borrower to assemble the Collateral and make it available to the Collateral Agent at a place to be designated by the Collateral Agent, in its sole discretion. 10.6 Sale of Collateral. The right of the Collateral Agent to sell or to otherwise dispose of all or any of the Collateral, at public or private sale or sales, with such notice as may be required by law, in lots or in bulk, for cash or on credit, all as the Collateral Agent, in its sole discretion, may deem advisable. Such sales may be adjourned from time to time with or without notice. The Collateral Agent shall have the right to conduct such sales on the premises of the Borrower or any of its Subsidiaries or elsewhere and shall have the right to use the premises of the Borrower or any of its Subsidiaries, without charge for such sales for such time or times as the Collateral Agent may see fit. The Collateral Agent is hereby granted a license or other right to use, without charge, the labels, patents, copyrights, rights of use of any name, trade secrets, trade names, trademarks, service marks and advertising matter, or any property of a similar nature, whether owned by the Borrower or with respect to which the Borrower has rights under license, sublicense or other agreements, as it pertains to the Collateral, in preparing for sale (including, without limitation, finishing any unfinished Inventory of the Borrower), advertising for sale and selling any Collateral and the rights of the Borrower under all licenses and all franchise agreements shall inure to the benefit of the Agents and the Lenders. The Collateral Agent shall have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash, credit or any combination thereof, and the Collateral Agent or any Lender may purchase all or any part of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment of such purchase price, may set off the amount of such price against the Obligations. The proceeds realized from the sale of any Collateral shall be applied first to the costs, expenses and attorneys' fees and expenses incurred by the Collateral Agent for collection and for acquisition, completion, protection, removal, storage, sale and delivery of the Collateral; second to interest due upon any of the Obligations; and third to the principal of the Obligations. Any remaining proceeds shall be remitted to the Borrower or other Person legally entitled thereto. If any deficiency shall arise, the Borrower shall remain liable to the Lenders therefor. 10.7 Judicial Proceedings. The right to proceed by an action or actions at law or in equity to obtain possession of the Collateral, to recover the Obligations and amounts secured hereunder or to foreclose under this Agreement and sell the Collateral or any portion thereof, pursuant to a judgment or decree of a court or courts of competent jurisdiction, all without the necessity of posting any bond. 10.8 Actions in Respect of the Letters of Credit Upon Default. If any Event of Default shall have occurred and be continuing, the LC Issuer may, irrespective of whether the Agents or the Lenders are taking any of the other actions described in this Article 10 or otherwise, make demand upon the Borrower to, and forthwith upon such demand the Borrower will, pay to the LC Issuer in accordance with Section 2.8, for deposit in a cash collateral account, an amount equal to the aggregate face amount of all Letters of Credit then outstanding. If at any time the LC Issuer determines that any funds held in any such cash collateral account are subject to any right or claim of any Person other than the LC Issuer or that the total amount of such funds is less than the aggregate face amount of all Letters of Credit, the Borrower will, forthwith upon demand by the LC Issuer, pay to the LC Issuer, as additional funds to be deposited and held in such cash collateral account, an amount equal to the excess of (a) such aggregate face amount of all outstanding Letters of Credit over (b) the total amount of funds, if any, then held in such cash collateral account that the LC Issuer determines to be free and clear of any such right and claim. 10.9 Notice. Any notice required to be given by the Collateral Agent of a sale, lease, or other disposition of the Collateral or any other intended action by the Lender, given to the Borrower in the manner set forth in Section 13.7 below, at least ten (10) days prior to such proposed action, shall constitute commercially reasonable and fair notice thereof to the Borrower. 10.10 Appointment of the Collateral Agent as the Borrower's Lawful Attorney. The Borrower irrevocably designates, makes, constitutes and appoints the Collateral Agent (and all persons designated by the Collateral Agent) as the true and lawful attorney of the Borrower and the Collateral Agent or the Collateral Agent's Agent, may, without notice to the Borrower and at such time or times following an Event of Default as the Collateral Agent or said Collateral Agent, in its sole discretion, may determine, in the name of the Borrower or in the Collateral Agent's name:(a) demand payment of the Accounts; (b) enforce payment of the Accounts, by legal proceedings or otherwise; (c) exercise all of the rights and remedies of the Borrower with respect to the collection of the Accounts; (d) settle, adjust, compromise, extend or renew the Accounts; (e) settle, adjust or compromise any legal proceedings brought to collect the Accounts; (f) notify the postal authorities to change the address and delivery of mail addressed to the Borrower to such address as the Collateral Agent may designate; (g) if permitted by Applicable Law, sell or assign the Accounts upon such terms, for such amounts and at such time or times as the Collateral Agent deems advisable; (h) discharge and release the Accounts; (i) take control, in any manner, of any item of payment or proceeds on the Accounts; (j) prepare, file and sign the names of the Borrower on a Proof of Claim in Bankruptcy or similar document against any Account Debtor; (k) prepare, file and sign the names of the Borrower on any notice of Lien, assignment or satisfaction of Lien or similar document in connection with the Accounts; (l) do all acts and things necessary, in the Collateral Agent's sole discretion, to fulfill the obligations of the Borrower under this Agreement; (m) endorse the name of the Borrower upon any of the items of payment or proceeds on any Account, and deposit the same to the account of the Lenders on account of the Obligations; (n) endorse the name of the Borrower upon any chattel paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement relating to the Accounts or Inventory; (o) use the stationery of the Borrower and sign the name of the Borrower to verifications of the Accounts and notices thereof to Account Debtors; and (p) use the information recorded on or contained in any data processing equipment and computer hardware and software relating to the Accounts and Inventory to which the Borrower has access. 11. CONDITIONS PRECEDENT 11.1 Conditions Precedent to Effectiveness. Notwithstanding any other provision of this Agreement, it is understood and agreed that this Agreement shall not be effective unless and until the following conditions have been met, to the sole and complete satisfaction of the Lenders, the Agents and their respective counsel: (a) Litigation. No action, suit, litigation, proceeding, investigation, regulation or legislation, including, but not limited to, any arising under the Environmental Laws, shall have been instituted, threatened or proposed before any court, governmental agency or legislative body which (i) seeks to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement or the making of any Loan hereunder; or (ii) if decided adversely to the Borrower or any of its Subsidiaries may result in a Material Adverse Effect. (b) -Equity Transaction. The Agents shall have received evidence satisfactory to them that Borrower has received, on or immediately prior to the Effective Date, not less than $5,000,000 in cash proceeds from the sales of shares of Borrower's common stock and/or Series B Preferred Stock. (c) Subordinated Seller Notes. The Agents shall have received evidence satisfactory to them that any and all promissory notes issued on or prior to the Effective Date in connection with Acquisitions are unsecured and have been subordinated in right of payment to the Obligations on terms and conditions satisfactory to the Agents and the Lenders and otherwise are on terms and conditions satisfactory to the Lenders and the Agents. (d) Financial Reports. The Agents shall have received each of the following: (i) the Audited Financial Statements and (ii) the Projections. (e) Loan Conditions. All conditions precedent set forth in Section 11.2 hereof have been fulfilled. (f) Fee Letter. All amounts required to be paid on the Effective Date pursuant to the Fee Letter have either been paid or arrangements for the payment thereof have been made to the satisfaction of the Administrative Agent and the Collateral Agent. (g) Documentation. The Administrative Agent and the Lenders shall have received the following documents, each dated the Effective Date (unless otherwise specified), each duly executed and delivered to the Administrative Agent and the Lenders, and each to be satisfactory in form and substance to the Administrative Agent and their respective and its counsel: (i) this Agreement; (ii) the Notes; (iii) the Amendment to the Master Agreements, executed by each of the Subsidiaries of Borrower; (iv) an Amended & Restated Collateral Assignment of Rights Agreement executed by the Borrower in favor of the Collateral Agent with respect to the Intercompany Loan Documents; (v) a certificate signed by the President or chief financial officer of the Borrower certifying that (A) the representations and warranties set forth in Article 5 hereof are true and correct in all respects on and as of such date with the same effect as though made on and as of such date; (B) the Borrower is on such date in compliance with all the terms and conditions set forth in this Agreement on its part to be observed and performed; and (C) on the Effective Date, after giving effect to the making of the initial Loan, no Default or Event of Default has occurred or is continuing; (vi) a certificate executed by the President or chief financial officer of the Borrower certifying as to the Equipment owned by the Borrower and the locations at which such Equipment is maintained; (vii) a certificate of the Secretary of the Borrower certifying (A) that attached thereto is a true and complete copy of the By-Laws of the Borrower, as in effect on the date of such certification; (B) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of the Borrower, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents; and (C) as to the incumbency and genuineness of the signatures of the officers of the Borrower executing this Agreement or any of the other Loan Documents; (viii) a certificate of the Secretary of each Subsidiary the Borrower certifying (A) that attached thereto is a true and complete copy of the By-Laws of each Subsidiary of the Borrower, as in effect on the date of such certification; (B) that attached thereto is a true and complete copy of Resolutions adopted by the Board of Directors of each Subsidiary of the Borrower, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents; and (C) as to the incumbency and genuineness of the signatures of the officers of each Subsidiary of the Borrower executing this Agreement or any of the other Loan Documents; (ix) a Borrowing Availability Certificate completed and signed by the chief financial officer of the Borrower and satisfactory to the Administrative Agent; (x) a copy of the Articles or Certificate of Incorporation of the Borrower and its Subsidiaries, and all restatements thereof or amendments thereto, certified as of a date close to the Effective Date by the Secretary of State of the State of each Person's incorporation; (xi) good standing certificates for the Borrower, certified as to a date close to the Effective Date, issued by the Secretaries of State of those states listed on Schedule 5.1 hereof in respect of Borrower; (xii) good standing certificates for the Subsidiaries of the Borrower, certified as of a date close to the Effective Date, and issued in each case by the Secretary of State of the states set forth on Schedule 5.15 hereto. (xiii) the written opinion of Swidler & Berlin, Chartered, counsel to the Borrower and its Subsidiaries, in the form attached hereto as Exhibit L, as to the transactions contemplated by this Agreement; (xiv) such other documents, instruments and agreements with respect to the transactions contemplated by this Agreement, in each case in such form and containing such additional terms and conditions as may be satisfactory to the Administrative Agent, the Collateral Agent and the Majority Lenders, containing, without limitation, representations and warranties which are customary and usual in such documents. 11.2 All Loans. The obligation of each Lender to make any Loan hereunder (including the initial Loan) and to issue any Letter of Credit (including the initial Letter of Credit) shall be subject to fulfillment of the following conditions: (a) No Injunction. No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain substantial damages in respect of, or which is related to or arises out of this Agreement, such Loan or such Letter of Credit or which in the sole discretion of the Administrative Agent and the Majority Lenders, would make it inadvisable to make such Loan or such Letter of Credit; (b) No Material Adverse Change. Since December 31, 1997, there shall not have occurred any material adverse change in the assets, liabilities, business, operations or condition (financial or otherwise) of the Borrower, or any event, condition, or state of facts which would be expected materially and adversely to affect the prospects of the Borrower or any of its Subsidiaries subsequent to the making of such Loan to the Borrower, as determined by the Administrative Agent and the Lenders in their sole discretion. (c) Solvency. The Lenders and the Administrative Agent shall be satisfied that, giving effect to the making of such Loan, or the issuance of such Letter of Credit, the Borrower and each of its Subsidiaries will be Solvent. (d) No Default or Event of Default. There shall exist no Default or Event of Default or any event or condition which, with the making of such Loan or the issuance of such Letter of Credit, would constitute a Default or Event of Default. (e) Representations and Warranties. All representations and warranties made by the Borrower and its Subsidiaries hereunder shall be true and correct in all respects as of the date of such Loan or Letter of Credit with the same force and effect as if made on and as of such date. (f) Regulatory Restrictions. Neither the Borrower nor any of its Subsidiaries shall be subject to any statute, rule, regulation, order, writ or injunction of any Governmental Authority which would restrict or hinder the conduct of the Borrower's or such Subsidiary's business as conducted or proposed to be conducted and which could have a Material Adverse Effect. In addition, the Administrative Agent, Collateral Agent and the Majority Lenders shall have reasonably satisfied itself that the Borrower and each of its Subsidiaries is in compliance with all Applicable Laws of any Governmental Authority the failure to comply with which, in the opinion of the Lender, could have a Material Adverse Effect. (g) Regulatory Approvals. The Borrower shall have received all required regulatory and other approvals or consents with regard to this Agreement and the other Loan Documents, such Loan or in respect of any Collateral being pledged in connection with such Loan. 11.3 Delay in Satisfaction of Conditions Precedent. If the Lenders make a Loan or issue a Letter of Credit prior to the fulfillment of any condition precedent set forth in this Article 11, the making of such Loan or issuance of such Letter of Credit shall constitute only an extension of time for the fulfillment of such condition and not a waiver thereof. The failure of the Borrower, for any reason, to satisfy or cause to be satisfied any such condition precedent within thirty (30) days after the date thereof shall constitute an Event of Default for all purposes under this Agreement and the other Loan Documents, unless such failure is waived in writing by the Lenders. 12. THE AGENT 12.1 Appointment, Powers and Immunities. Each Lender hereby irrevocably appoints and authorizes each of the Agents to each act as its agent hereunder with such powers as are specifically delegated to such Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto. No Agent (which term as used in this sentence and in Section 12.5 hereof and the first sentence of Section 12.6 hereof shall include reference to its Affiliates and its own and its Affiliates' officers, directors, employees and agents): (a) shall have any duties or responsibilities except those expressly set forth in this Agreement with respect to such Agent, and shall not by reason of this Agreement be a trustee for any Lender; (b) shall be responsible to the Lenders for any recitals, statements, representations or warranties contained in this Agreement or any of the other Loan Documents, or in any certificate or other instrument, document or agreement referred to or provided for in, or received by any of them under, this Agreement or any of the other Loan Documents, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement, any Note or any of the other Loan Documents or for any failure by either Borrower or any other Person to perform any of its obligations hereunder or thereunder; (c) subject to Section 12.3 hereof, shall be required to initiate or conduct any litigation or collection proceedings hereunder; and (d) shall be responsible for any action taken or omitted to be taken by it hereunder or under any other agreement, document or instrument referred to or provided for herein or in connection herewith, except for its own gross negligence or willful misconduct. The Administrative Agent and Collateral Agent may each employ agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. The Administrative Agent may deem and treat the payee of any Note as the holder thereof for all purposes hereof unless and until a written notice of the assignment or transfer complying with the terms and conditions of Section 13.3 hereof. 12.2 Reliance by Agents. Each Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, facsimile, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by such Agent. As to any matters not expressly provided for by this Agreement, each Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Majority Lenders (unless the instructions of or consent of all of the Lenders is required hereunder), and such instructions and any action taken or failure to act pursuant thereto shall be binding on all of the Lenders; provided, however, no Agent shall be required to take any action which (a) such Agent reasonably believes will expose it to personal liability unless such Agent receives an indemnification satisfactory to it from the Lenders with respect to such action or (b) is contrary to this Agreement, the Notes, the other Loan Documents or Applicable Law. 12.3 Defaults. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of a Default or Event of Default (other than the non-payment of principal of or interest on Loans or of Commitment Fees) unless the Administrative Agent has received notice from a Lender or the Borrower specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that the Administrative Agent receives such a notice of the occurrence of a Default or Event of Default, the Administrative Agent shall give prompt notice thereof to the Lenders (and shall give each Lender prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 12.7 hereof) take such action with respect to such Default or Event of Default as shall be directed by the Majority Lenders (unless the directions of or consent of all of the Lenders is required hereunder), provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Lenders. 12.4 Rights as a Lender. With respect to its Commitment and the Loans made by it, CCF (and any successor acting as Administrative Agent or Collateral Agent) in its capacity as a Lender hereunder shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as the Administrative Agent and/or Collateral Agent, and the term "the Lender" or "the Lenders" shall, unless the context otherwise indicates, include each in its individual capacity. CCF (and any successor acting as Administrative Agent or Collateral Agent) and its Affiliates may (without having to account therefor to any Lender) accept deposits from, lend money to and generally engage in any kind of banking, trust or other business with the Borrower (and any of its Affiliates) as if it were not acting as the Administrative Agent or Collateral Agent, and CCF and its Affiliates may accept fees and other consideration from the Borrower for services in connection with this Agreement or otherwise without having to account for the same to the Lenders. 12.5 Indemnification. The Lenders agree to indemnify the Administrative Agent, Collateral Agent, Co-Agent and the LC Issuer (to the extent not reimbursed under Sections 13.5 or 3.10 hereof, but without limiting the obligations of the Borrower under said Sections 13.5 and 3.10), for their respective Commitment Percentages of any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent, Collateral Agent, Co-Agent or the LC Issuer in any way relating to or arising out of this Agreement or any other instruments, documents or agreements contemplated by or referred to herein or the transactions contemplated hereby (including, without limitation, the costs and expenses which the Borrower is are obligated to pay under Section 13.5 hereof but excluding, unless an Event of Default has occurred and is continuing, normal administrative costs and expenses of the Administrative Agent, the Collateral Agent and the Co-Agent incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or of any such other instruments, documents or agreements, provided that no Lender shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. The obligations of the Lenders under this Section 12.5 shall survive the termination of this Agreement. 12.6 Non-Reliance on Administrative Agent and the other Lenders. Each Lender agrees that it has, independently and without reliance on the Administrative Agent, the Collateral Agent, the Co-Agent, the LC Issuer or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Borrower and the Subsidiaries of the Borrower and its own decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, the Co-Agent, the LC Issuer or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement. Neither the Administrative Agent, the Collateral Agent nor the Co-Agent shall be required to keep itself informed as to the performance or observance by the Borrower of this Agreement or any other instrument, document or agreement referred to or provided for herein or to inspect the properties or books of the Borrower. Except for notice, reports and other documents and information expressly required to be furnished to the Lenders by the Administrative Agent or the Collateral Agent hereunder, neither the Administrative Agent, the Collateral Agent, any Co-Agent nor the LC Issuer shall have any duty or responsibility to provide any Lender with any credit or other information concerning the affairs, financial condition or business of the Borrower (or any of its Affiliates) which may come into the possession of the Administrative Agent, the Collateral Agent, any Co-Agent nor the LC Issuer or any of their respective Affiliates. 12.7 Failure to Act. Except for action expressly required of the Administrative Agent, Collateral Agent, Co-Agent or LC Issuer hereunder, such Administrative Agent, Collateral Agent, Co-Agent or LC Issuer, as applicable shall in all cases be fully justified in failing or refusing to act hereunder unless it shall receive further assurances to its satisfaction from the Lenders of their indemnification obligations under Section 12.5 hereof against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. 12.8 Resignation or Removal of an Agent. (a) Subject to the appointment and acceptance of a successor Agent as provided below, an Agent may resign at any time by giving notice thereof to the Lenders and the Borrower, and an Agent may be removed at any time with cause by the Majority Lenders. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Majority Lenders and shall have accepted such appointment with thirty (30) days after the retiring Agent's giving of notice of resignation or the Majority Lender's removal of the retiring Agent, the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a bank which has a combined capital and surplus of at least Three Hundred Million Dollars ($300,000,000). Upon the acceptance of any appointment as Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation or removal hereunder as Agent, the provisions of this Section 12.8 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as an Agent. (b) In the event that Applicable Law imposes any restrictions on the identity of an agent such as the Administrative Agent or Collateral Agent or requires the appointment of any co-agent in connection therewith, the Administrative Agent or Collateral Agent, as the case may be, may, in its discretion, for the purpose of complying with such restrictions, appoint one or more subagents or co-agents hereunder. Any such subagent(s) or co-agent(s) shall have the same rights, powers, privileges and obligations as the Administrative Agent or Collateral Agent, as the case may be, and shall be subject to and entitled to the benefits of all provisions of this Agreement and the Loan Documents relative to such Agent. In addition to any rights of the Majority Lenders set forth in subsection (a) above, any such subagent or co-agent may be removed at any time by Agent which appointed such subagent or co-agent. 12.9 Collateral Matters. (a) Authority. Each Lender authorizes and directs the Collateral Agent to enter into the Loan Documents relating to the Collateral for the benefit of the Lenders. Each Lender agrees that any action taken by the Collateral Agent or the Majority Lenders (or, where required by the express terms of this Agreement, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or the other Loan Documents, and the exercise by the Collateral Agent or the Majority Lenders (or, where so required, such greater proportion) of the powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders. Without limiting the generality of the foregoing, the Collateral Agent shall have the sole and exclusive right and authority to (i) act as the disbursing and collecting agent for the Lenders with respect to all payments and collections arising in connection with this Agreement and the Loan Documents relating to the Collateral; (ii) execute and deliver each Loan Document relating to the Collateral and accept delivery of each such agreement delivered by the Borrower or any of its Subsidiaries; (iii) act as collateral agent for the Lenders for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein, provided, however, the Collateral Agent hereby appoints, authorizes and directs the Lenders to act as collateral sub-agents for the Collateral Agent and the Lenders for purposes of the perfection of all security interests and Liens with respect to the Borrower's and its Subsidiaries' respective deposit accounts maintained with, and cash and other property held by, such Lender; (iv) manage, supervise and otherwise deal with the Collateral; (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interest and Liens created or purported to be created by the Loan Documents, and (vi) except as may be otherwise specifically restricted by the terms of this Agreement or any other Loan Document, exercise all remedies given to the Collateral Agent or the Lenders with respect to the Collateral under the Loan Documents, Applicable Law or otherwise. (b) Each Lender hereby directs, in accordance with the terms of this Agreement, the Collateral Agent to release or to subordinate any Lien held by the Collateral Agent for the benefit of the Lenders: (i) against all of the Collateral, upon final and indefeasible payment in full of the Obligations and termination of this Agreement; (ii) against any part of the Collateral sold or disposed of by the Borrower or any of its Subsidiaries, if such sale or disposition is permitted by Section 7.3 hereof or is otherwise consented to by the Majority Lenders, as certified to the Collateral Agent by the Borrower in an Officer's Certificate; (iii) against any part of the Collateral constituting property in which the Borrower owned no interest at the time the Lien was granted or at any time thereafter; or (iv) if approved, authorized or ratified in writing by the Collateral Agent at the direction of Majority Lenders. Each Lender hereby directs the Collateral Agent to execute and deliver or file such termination and partial release statements and do such other things as are necessary to release Liens to be released pursuant to Section 12.9(b) hereof promptly upon the effectiveness of any such release. (c) Each Lender hereby directs, in accordance with the terms of this Agreement, the Collateral Agent to release any Subsidiary of Borrower from any Guarantee provided by such Subsidiary in favor by the Collateral Agent for the benefit of the Lenders: (i) upon final and indefeasible payment in full of the Obligations and termination of this Agreement; (ii) upon the sale or other disposition of all of the issued and outstanding shares of capital stock of such Subsidiary if such sale or disposition is permitted by Section 7.3 hereof or is otherwise consented to by the Majority Lenders, as certified to the Collateral Agent by the Borrower in an Officer's Certificate; (iii) if approved, authorized or ratified in writing by the Collateral Agent at the direction of Majority Lenders. Each Lender hereby directs the Collateral Agent to execute and deliver or file such releases and do such other things as are necessary to release Guarantees to be released pursuant to Section 12.9(c) hereof promptly upon the effectiveness of any such release. (d) Without in any manner limiting the Collateral Agent's authority to act without any specific or further authorization or consent by Majority Lenders (as set for in Sections 12.9(b) or (c) hereof), each Lender agrees to confirm in writing, upon request by the Borrower, the authority to release Collateral conferred upon the Collateral Agent under clauses (i) through (iv) of Section 12.9(b) hereof or the authority to release Guarantees conferred upon the Collateral Agent under clause (i) through (iii) of Section 12.9(c) hereof. So long as no Default or Event of Default is then continuing, upon receipt by the Collateral Agent of any such written confirmation from the Majority Lenders of its authority to release any particular items or types of Collateral, and in any event upon any sale and transfer of Collateral which is expressly permitted pursuant to the terms of this Agreement, and upon at least five (5) Business Days prior written request by the Borrower, the Collateral Agent shall (and is hereby irrevocably authorized by the Lenders to) execute such documents as may be necessary to evidence the release of the Liens granted to the Collateral Agent for the benefit of the Lenders herein or pursuant hereto upon such Collateral; provided, that (i) the Collateral Agent shall not be required to execute any such document on terms which, in the Collateral Agent's opinion, would expose the Collateral Agent to liability or create any obligation or entail any consequence other that the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any Liens upon (or obligations of the Borrower in respect of) all interests retained by the Borrower, including without limitation the proceeds of any sale, all of which shall continue to constitute part of the Collateral. (e) The Collateral Agent shall have no obligation whatsoever to the Lenders or to any other Person to assure that the Collateral exists or is owned by the Borrower or any of its Subsidiaries or is cared for, protected or insured or has been encumbered or that the Liens granted to the Collateral Agent pursuant to this Agreement or any of the Loan Documents have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to the Collateral Agent in this Section 12.9 or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or in any act, omission or event related thereto, the Collateral Agent may act in any manner it may deem appropriate, in its sole discretion, given its own interest in the Collateral as one of the Lenders and that the Collateral Agent shall have no duty or liability whatsoever to any Lender. 12.10 The Borrower Not a Beneficiary. The provisions of this Article 12 are solely for the benefit of the Agents, the LC Issuer and the Lenders and neither the Borrower nor any Subsidiary of the Borrower shall have any right to rely on or enforce any of the provisions hereof. In performing their functions and duties under this Agreement, the Agents shall act solely as the Agents of the Lenders and do not assume and shall not be deemed to have assumed any obligations or relationship of agency, trustee or fiduciary with or for the Borrower or any Subsidiary of the Borrower. 13. MISCELLANEOUS 13.1 Waiver. Each and every right and remedy granted to the Agents, the LC Issuer and the Lenders under this Agreement, the other Loan Documents or any other document delivered hereunder or in connection herewith or allowed them by law or in equity, shall be cumulative and may be exercised from time to time. No failure on the part of the Agents, the LC Issuer or any Lender to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by the Agents or any Lender of any right or remedy preclude any other or future exercise thereof or the exercise of any other right or remedy. No waiver by the Agents or the Lenders of any Default or Event of Default shall constitute a waiver of any subsequent Default or Event of Default. 13.2 Survival. All representations, warranties and covenants made herein shall survive the execution and delivery of all of the Loan Documents. The terms and provisions of this Agreement shall continue in full force and effect until the termination of this Agreement in accordance with Section 2.7 hereof; provided, further, that the Borrower's obligations under Sections 2.9(b), 3.9, 3.10, 13.5 and 13.13 shall survive the repayment of the Obligations and the termination of this Agreement. 13.3 Assignments; Successors and Assigns. (a) This Agreement is a continuing obligation and binds, and the benefits hereof shall inure to, the Borrower, the Agents, the LC Issuer and each Lender and their respective successors and assigns; provided, that the Borrower may not transfer or assign any or all of its rights or obligations hereunder without the prior written consent of all of the Lenders. (b) Any Lender may, in accordance with Applicable Law, at any time sell to one or more banks or other financial institutions ("Participants") participating interests in any Loans owing to such Lender, any of the Notes held by such Lender, any Commitment held by such Lender hereunder or any other interests of such Lender hereunder. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.9(b), 3.9, 3.10 and 13.13 hereof with respect to its participation; provided that no Participant shall be entitled to receive any greater amount pursuant to such Section than such Lender would have been entitled to receive in respect of the amount of the participation transferred by such Lender to such Participant had no such transfer occurred. (c) Each Lender may, with the Administrative Agent's consent and in accordance with Applicable Law, at any time assign, pursuant to an assignment substantially in the form of Exhibit M attached hereto and incorporated herein by reference, without the Borrower's consent to one or more banks having unimpaired capital and surplus of Two Hundred Fifty Million Dollars ($250,000,000) or more or may assign with the Borrower's consent (which shall not be unreasonably withheld) to any other financial institution (in either case, "Eligible Assignees") all or any part of any Loans owing to such Lender, any of the Notes held by such Lender, such Lender's reimbursement and other rights and obligations in connection with any Letter of Credit issued hereunder, the portion of the Commitment held by such Lender or any other interest of such Lender hereunder; provided, however, that (i) unless Borrower and the Administrative Agent consent otherwise, and except in the case of an assignment to another Lender, any such partial assignment shall be in a minimum principal amount of Five Million Dollars ($5,000,000) and (ii) each such assignment by a Lender of its Loans, Notes, Commitment, or Letter of Credit Obligations shall be made in such manner so that the same portion of its Loans, Notes, Commitment, and Letter of Credit Obligations is assigned to the respective assignee. The Borrower and the Lenders agree that to the extent of any assignment the Assignee shall be deemed to have the same rights and benefits with respect to the Borrower under this Agreement and any of the Notes and any Letter of Credit as it would have had if it were a Lender hereunder on the Effective Date and the assigning Lender shall be released from its Commitment and other obligations hereunder, to the extent of such assignment. Upon the making of an assignment, the assigning Lender shall pay to the Administrative Agent an assignment fee of $3,000. (d) In addition to the assignments and participations permitted under the foregoing provisions of this Section 13.3, any Lender may assign and pledge all or any portion of its Loans and its Note to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Lender from its obligations hereunder. (e) The Borrower authorizes each Lender to disclose to any Participant or Eligible Assignee ("Transferee") and any prospective Transferee any and all financial information in such Lender's possession concerning the Borrower or any of its Subsidiaries which has been delivered to such Lender by the Borrower or the Administrative Agent pursuant to this Agreement or which has been delivered to such Lender by the Borrower in connection with such Lender's credit evaluation of the Borrower prior to entering into this Agreement. (f) Any Lender shall be entitled to have any Note held by it subdivided in connection with a permitted assignment of all or any portion of such Note and the respective Loans evidenced thereby pursuant to Section 13.3(c) above. In the case of any such subdivision, the new Note (the "New Note") issued in exchange for a Note (the "Old Note") previously issued hereunder (i) shall be substantially in the form of Exhibit F hereto, as appropriate, (ii) shall be dated the date of such assignment, (iii) shall be otherwise duly completed and (iv) shall bear a legend, to the effect that such New Note is issued in exchange for such Old Note and that the indebtedness represented by such Old Note shall not have been extinguished by reason of such exchange. Without limiting the obligations of the Borrower under Section 13.5 hereof, the Lenders shall use reasonable best efforts to ensure that any such assignment does not result in the imposition of any intangibles, documentary stamp and other taxes, if any, which may be payable in connection with the execution and delivery of any such New Note. (g) Anything in this Section 13.3 to the contrary notwithstanding, no Lender may assign or participate any interest in any Loan held by it hereunder to the Borrower or any of its respective Affiliates or Subsidiaries without the prior written consent of each Lender. 13.4 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which when fully executed shall be an original, and all of said counterparts taken together shall be deemed to constitute one and the same agreement. Any signature page to this Agreement may be witnessed by a telecopy or other facsimile of any original signature page and any signature page of any counterpart hereof may be appended to any other counterpart hereof to form a completely executed counterpart hereof. 13.5 Expense Reimbursement. The Borrower agrees to reimburse the Administrative Agent, the Collateral Agent and the Co-Agent for all of their respective expenses incurred in connection with the negotiation, preparation, execution, delivery, modification, and enforcement of this Agreement, the Notes and the other Loan Documents, including, without limitation, audit costs, appraisal costs, the cost of searches, filings and filing fees, taxes and the fees and disbursements of the Agents' counsel, and all costs and expenses incurred by the Administrative Agent, Collateral Agent, the Co-Agent and the Lenders (including, without limitation, attorneys' fees and disbursements) to: (a) commence, defend or intervene in any court proceeding; (b) file a petition, complaint, answer, motion or other pleading, or to take any other action in or with respect to any suit or proceeding (bankruptcy or otherwise) relating to the Collateral, any Letter of Credit or this Agreement, the Notes or any of the other Loan Documents; (c) protect, collect, lease, sell, take possession of, or liquidate any of the Collateral; (d) attempt to enforce any Lien in any of the Collateral or to seek any advice with respect to such enforcement; and (e) enforce any of the Agents' and the Lenders' rights to collect any of the Obligations. The Borrower also agrees to pay, and to save harmless the Agents and the Lenders from any delay in paying, any intangibles, documentary stamp and other taxes, if any, which may be payable in connection with the execution and delivery of this Agreement, the Notes, or any of the other Loan Documents, or the recording of any thereof, the issuance of any Letter of Credit or in any modification hereof or thereof. Additionally, the Borrower agrees to pay to the Lender on demand any and all fees, costs and expenses which the Administrative Agent or such Lender pays to a bank or other similar institution arising out of or in connection with (i) the forwarding to the Borrower or any other Person, on behalf of the Borrower, by the Administrative Agent or such Lender of proceeds of any Loan and (ii) the depositing for collection by the Administrative Agent and each Lender of any check or item of payment received by or delivered to the Administrative Agent or such Lender on account of the Obligations. All fees, costs and expenses provided for in this Section 13.5 may, at the option of the Majority Lenders, be charged as Loans to the loan account of the Borrower with the Administrative Agent provided for in Section 2.3 hereof. The Borrower's obligations under this Section 13.5 shall survive the termination of this Agreement and the repayment of the Obligations. 13.6 Severability. If any provision of this Agreement or any of the other Loan Documents or the application thereof to any party thereto or circumstances shall be invalid, illegal or unenforceable to any extent, the remainder of this Agreement or such Loan Document and the application of such provisions to any other party thereto or circumstance shall not be affected thereby and shall be enforced to the greatest extent permitted by law. 13.7 Notices. Except as otherwise provided herein, all notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been given or made when (a) delivered by hand, (b) sent by telex or facsimile transmitter (with receipt confirmed), provided that a copy is mailed by certified mail, return receipt requested, or (c) when received by the addressee, if sent by Express Mail, Federal Express or other overnight delivery service (receipt requested), in each case to the appropriate addresses, telex numbers, facsimile numbers designated for a party at the "Address for Notices" specified below its name on the signature pages hereto or to such other addresses as may be designated hereafter in writing by the respective parties hereto. 13.8 Entire Agreement; Amendment. This Agreement and the other Loan Documents constitute the entire agreement between the parties hereto with respect to the subject matter hereof and supersede all prior negotiations, understandings and agreements between such parties in respect of such subject matter. Neither this Agreement nor any provision hereof may be changed, waived, discharged, modified or terminated except pursuant to a written instrument signed by the Borrower, the Administrative Agent and the Majority Lenders or by the Borrower and the Administrative Agent acting with the consent of the Majority Lenders; provided, however, that no such amendment, waiver, discharge, modification or termination shall, except pursuant to an instrument signed by the Borrower, the Agents and all of the Lenders or by the Borrower and the Administrative Agent acting with the consent of all of the Lenders, (a) increase the amount of, extend the term of, or extend the time or waive any requirement for the termination of the Commitments; (b) extend the date fixed for the scheduled payment of principal of, or interest on, any Loan; (c) reduce the amount of any scheduled payment of principal of, or the rate of interest on, any Loan; (d) reduce any fee payable hereunder; (e) alter the terms of this Section 13.8; (f) except as permitted by Section 12.9(c) hereof, release any guarantor of the Obligations; (g) reduce the Commitment of any Lender in any manner which would change such Lender's Commitment Percentage; or (h) amend the definitions of the term "Majority Lenders" or "Borrowing Availability" set forth in Section 1.1 hereof; provided, further, that any amendment, waiver, discharge modification or termination of any provision of Section 12 hereof, or which increases the obligations of any Agent hereunder and under the Loan Documents, shall require the written consent of the such Agent. Anything in this Agreement to the contrary notwithstanding, if any Lender shall fail to fulfill its obligations to make any Loan hereunder then, for so long as such failure shall continue, such Lender shall (unless the Majority Lenders, determined as if such Lender were not a " Lender" hereunder, shall otherwise consent in writing) be deemed for all purposes relating to amendments, modifications, waivers or consents under this Agreement or the Notes (including, without limitation, under this Section 13.8) to have no Loans, no Commitment, shall not be treated as a "Lender" hereunder when performing the computation of Majority Lenders, and shall have no rights under the preceding paragraph of this Section 13.8; provided that any action taken by the other Lenders with respect to the matters referred to in clauses (a) through (h) of the preceding paragraph shall not be effective as against such Lender. 13.9 Time of the Essence. Time is of the essence in this Agreement and the other Loan Documents. 13.10 Interpretation. No provision of this Agreement shall be construed against or interpreted to the disadvantage of any party hereto by any court or other Governmental Authority by reason of such party having or being deemed to have structured or dictated such provision. 13.11 Lenders Not Joint Venturers. Neither this Agreement, the other Loan Documents, any agreements, instruments, documents executed and delivered pursuant hereto or thereto or in connection herewith or therewith, nor any of the transactions contemplated hereby or thereby shall in any respect be interpreted, deemed or construed as making any Agent or any Lender a partner or joint venturer with the Borrower or any of its Subsidiaries or as creating any similar relationship or entity, and the Borrower agrees that it will not make, and will not permit any of its Subsidiaries to make, any assertion, contention, claim or counterclaim to the contrary in any action, suit or other legal proceeding involving an Agent or the Lenders and the Borrower or any of its Subsidiaries. 13.12 Cure of Defaults by Lenders. If, hereafter, the Borrower or any of its Subsidiaries defaults in the performance of any duty or obligation to any third party, any Lender may, at its option, but without obligation, cure such default and any costs, fees and expenses incurred by such Lender in connection therewith including, without limitation, for payment on mortgage or note obligations, for the purchase of insurance, the payment of taxes and the removal or settlement of Liens and claims, and such costs, fees and expenses shall be included in the Obligations and be secured by the Collateral. 13.13 Indemnity. In addition to any other indemnity provided for herein, the Borrower hereby indemnifies the Agents, the LC Issuer and each Lender from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, fees and disbursements of counsel) which may be imposed on, incurred by, or asserted against the Agents, the LC Issuer or such Lender in any litigation, proceeding or investigation instituted or conducted by any Governmental Authority or any other Person (other than the Borrower) with respect to any aspect of, or any transaction contemplated by, or referred to in, or any matter related to, this Agreement or the other Loan Documents, whether or not the Agents, the LC Issuer or such Lender is a party thereto, except to the extent that any of the foregoing arises out of gross negligence, willful misconduct or a material breach of this Agreement by the Agents, the LC Issuer or such Lender, as the case may be. Additionally, the Borrower hereby indemnifies and holds the Agents, the LC Issuer and each Lender harmless from all loss, cost (including, without limitation, fees and disbursements of counsel), liability and damage whatsoever incurred by the Agents, the LC Issuer or such Lender by reason of any violation of any applicable Environmental Laws for which the Borrower, any of its Subsidiaries or any of their respective predecessors has any liability or which occurs upon any real estate owned by or under the control of the Borrower or any of its Subsidiaries, or by reason of the imposition of any governmental Lien for the recovery of environmental cleanup costs expended by reason of such violation. The Borrower's obligations under this Section 13.13 shall survive the termination of this Agreement and the repayment of the Obligations. 13.14 Consequential Damages. NEITHER ANY AGENT, THE LC ISSUER NOR ANY LENDER SHALL BE RESPONSIBLE OR LIABLE TO THE BORROWER, ANY OF ITS SUBSIDIARIES, OR ANY OTHER PERSON OR ENTITY FOR ANY PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 13.15 Attorney-in-Fact. The Borrower hereby designates, appoints and empowers the Administrative Agent irrevocably as its attorney-in-fact, at the Borrower's cost and expense, to do in the name of the Borrower any and all actions which the Administrative Agent may deem necessary or advisable to carry out the terms hereof upon the failure, refusal or inability of the Borrower to do so, and the Borrower hereby agrees to indemnify and hold the Administrative Agent harmless from any costs, damages, expenses or liabilities arising against or incurred by the Administrative Agent in connection therewith except to the extent that any of such costs, damages, expenses or liabilities arise out of the Administrative Agent's gross negligence or willful misconduct. 13.16 Financing Statements. (a) Borrower hereby ratifies and confirms that all financing statements filed under the Uniform Commercial Code in connection with the Original Loan Agreement, showing "IT Partners, Inc." as the debtor and CCF, as agent, as the secured party, shall be sufficient to perfect the Liens continued and granted to the Collateral Agent pursuant to this Agreement and the Loan Documents, to the extent such Liens may be perfected by the filing of financing statements and Borrower hereby agrees that it shall not make any assertion, contention, claim or counterclaim to the contrary in any action, suit or other legal proceeding involving any Agent or the Lenders and Borrower. (b) The Borrower acknowledges and agrees that it is the Borrower's intent that all financing statements filed against the Borrower or any of its Subsidiaries in connection with this Agreement or the Original Loan Agreement shall remain in full force and effect until the Commitment shall have been terminated in accordance with the provisions hereof, even if, at any time or times prior to such termination, no Loans or Letters of Credit shall be outstanding hereunder. Accordingly, the Borrower waives any right which it may have under Section 9-404(1) of the UCC to demand the filing of termination statements with respect to the Collateral, and agrees that the Collateral Agent shall not be required to send such termination statements to the Borrower or any of its Subsidiaries, or to file them with any filing office, unless and until the Commitment shall have been terminated in accordance with the terms of this Agreement and all Obligations paid in full in immediately available funds and until the termination or expiration of all Letters of Credit. Upon such termination and payment in full, the Collateral Agent shall execute appropriate termination statements and deliver the same to the Borrower. 13.17 Governing Law; Jurisdiction. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE BORROWER, THE AGENTS, THE LC ISSUER AND EACH LENDER HEREBY (A) SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE LETTERS OF CREDIT, THE NOTES, OR THE OTHER LOAN DOCUMENTS; (B) AGREES THAT SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT AND THE LOAN DOCUMENTS; AND (C) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, NOTHING HEREIN SHALL LIMIT THE RIGHT OF ANY AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. 13.18 Waiver of Jury Trial. AFTER REVIEWING THIS PROVISION SPECIFICALLY WITH ITS RESPECTIVE COUNSEL, THE BORROWER, EACH AGENT, THE LC ISSUER AND EACH LENDER HEREBY KNOWINGLY, INTELLIGENTLY AND INTENTIONALLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL PROCEEDING BASED ON OR ARISING OUT OF, UNDER, IN CONNECTION WITH, OR RELATING TO THIS AGREEMENT, THE LETTERS OF CREDIT, ANY OF THE NOTES, ANY OF THE OTHER LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED HEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF THE BORROWER, ANY AGENT OR ANY LENDER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS TO MAKE THE LOANS TO THE BORROWER. DK ------ Initials IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Collateral Agent, the Co-Agent, the LC Issuer and the Lenders have caused their duly authorized officers to set their hands and seals as of the day and year first above written. "Borrower" IT PARTNERS, INC. By: /s/ Daniel J. Klein ------------------- Daniel J. Klein Chairman and Chief Executive Officer Attest: /s/ Jamie E. Blech ------------------ Jamie E. Blech Secretary [CORPORATE SEAL] Address for Notices: IT Partners, Inc. 9881 Broken Land Parkway Suite 102 Columbia, MD 21046 Attn.: Daniel J. Klein Facsimile: (410) 309-9801 Telephone: (410) 309-9800 with a copy to: Swidler & Berlin, Chartered 3000 K Street Washington, DC 20007 Attn.: Andrew M. Ray, Esq. Facsimile: (202) 424-7643 Telephone: (202) 424-7585 [Signatures continued on following page] [Signatures continued from previous page] "Administrative Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ------------------ Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake ------------------ Carl G. Drake Vice President Address for Notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, Connecticut 06830 Attn: Lisa Bruno Facsimile No: (203) 861-6594 with copies to: Creditanstalt Corporate Finance, Inc. Two Ravinia Drive Suite 1680 Atlanta, Georgia 30346 Attn: Robert M. Biringer Carl G. Drake Facsimile No: (770) 390-1851 and Troutman Sanders LLP 600 Peachtree Street, N.W. Suite 5200 Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster, Esq. Facsimile No: (404) 885-3900 [Signatures continued on following page] [Signatures continued from previous page] "Collateral Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ------------------ Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake ------------------ Carl G. Drake Vice President Address for Notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, Connecticut 06830 Attn: Lisa Bruno Facsimile No: (203) 861-6594 with copies to: Creditanstalt Corporate Finance, Inc. Two Ravinia Drive Suite 1680 Atlanta, Georgia 30346 Attn: Robert M. Biringer Carl G. Drake Facsimile No: (770) 390-1851 and Troutman Sanders LLP 600 Peachtree Street, N.W. Suite 5200 Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster, Esq. Facsimile No: (404) 885-3900 [Signatures continued on following page] [Signatures continued from previous page] "Co-Agent" CREDIT AGRICOLE INDOSUEZ CREDIT AGRICOLE INDOSUEZ By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President Address for Notices: Credit Agricole Indosuez 1211 6th Avenue, 7th Floor New York, NY 10036 Attn: Michael Arougheti Facsimile No: (212) 278-2254 with copies to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005-1720 Attn: John Schuster, Esq. Facsimile No: (212) 269-5420 [Signatures continued on following page] [Signatures continued from previous page] "Lenders" Commitment: CREDITANSTALT CORPORATE FINANCE, INC. $35,000,000 CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ------------------ Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake ------------------ Carl G. Drake Vice President Address for Notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, Connecticut 06830 Attn: Lisa Bruno Facsimile No: (203) 861-6594 with copies to: Creditanstalt Corporate Finance, Inc. Two Ravinia Drive Suite 1680 Atlanta, Georgia 30346 Attn: Robert M. Biringer Carl G. Drake Facsimile No: (770) 390-1851 and Troutman Sanders LLP 600 Peachtree Street, N.W. Suite 5200 Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster, Esq. Facsimile No: (404) 885-3900 [Signatures continued on following page] [Signatures continued from previous page] Commitment: CREDIT AGRICOLE INDOSUEZ $35,000,000 By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President Address for Notices: Credit Agricole Indosuez 1211 6th Avenue, 7th Floor New York, NY 10036 Attn: Michael Arougheti Facsimile No: (212) 278-2254 with copies to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005-1720 Attn: John Schuster, Esq. Facsimile No: (212) 269-5420 [Signatures continued on following page] [Signatures continued from previous page] "LC Issuer" CREDITANSTALT CORPORATE FINANCE, INC. By:/s/ Robert M. Bitiringer Robert M. Biringer Executive Vice President By:/s/ Carl G. Drake Carl G. Drake Vice President Address for Notices: Creditanstalt Corporate Finance, Inc. Two Greenwich Plaza Greenwich, Connecticut 06830 Attn: Lisa Bruno Facsimile No: (203) 861-6594 with copies to: Creditanstalt Corporate Finance, Inc. Two Ravinia Drive Suite 1680 Atlanta, Georgia 30346 Attn: Robert M. Biringer Carl G. Drake Facsimile No: (770) 390-1851 and Troutman Sanders LLP 600 Peachtree Street, N.W. Suite 5200 Atlanta, Georgia 30308-2216 Attn: Hazen H. Dempster, Esq. Facsimile No: (404) 885-3900 FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "First Amendment") is made and entered into as of the 2nd day of July, 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Borrower"), each of the Lenders signatory hereto (hereinafter referred to individually as a "Lender" and collectively as the "Lenders"), CREDITANSTALT CORPORATE FINANCE, INC., as the letter of credit issuer (in such capacity, the "LC Issuer"), CREDIT AGRICOLE INDOSUEZ, as co-agent for the Lenders (in such capacity, together with its successors and assigns, the "Co-Agent") and CREDITANSTALT CORPORATE FINANCE, INC., as collateral agent for the Lenders (in such capacity, together with its successors and assigns, the "Collateral Agent") and administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Administrative Agent"; the Co-Agent, Collateral Agent and Administrative Agent are collectively referred to as the "Agents" and individually referred to as an "Agent"). W I T N E S S E T H: WHEREAS, Borrower, the Lenders, LC Issuer and the Agents are parties to that certain Amended and Restated Loan and Security Agreement dated as of March 31, 1998 (as the same may be amended, restated and supplemented from time to time, the "Loan Agreement"), which currently provides for a revolving credit facility (the "Loan" or "Loans") in the aggregate principal amount of up to Seventy Million Dollars ($70,000,000) at any one time outstanding; and WHEREAS, the Borrower has requested that the Lenders, LC Issuer and the Agents amend the Loan Agreement in order to amend certain definitions and covenants, and to make certain other changes as provided herein; and WHEREAS, the Lenders, LC Issuer and the Agent are willing to agree to such request, subject to the terms and conditions of this First Amendment; NOW, THEREFORE, for and in consideration of the premises, the terms and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Defined terms used herein, as indicated by the initial capitalization thereof, shall have the same respective meanings ascribed to such terms in the Loan Agreement unless otherwise specifically defined herein. 2. Amendments. 2.1. The definition of "Applicable Margin" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Applicable Margin" to read as follows: "Applicable Margin" shall mean (a) with respect to Eurodollar Loans, four percent (4%) per annum and (b) with respect to Base Rate Loans, two percent (2%) per annum; provided however, that if on the last day of any fiscal quarter, commencing with the earlier of (i) the fiscal quarter during which Borrower completes a registered public offering of shares of its common stock which results in the repayment of not less than $25,000,000 in principal amount of Loans from the proceeds of such offering and (ii) the fiscal quarter ending December 31, 1998, Borrower's Senior Debt Leverage Ratio shall fall within any of the ranges set forth below, then, subject to delivery by a senior financial officer of Borrower of financial statements for that quarter, together with a Compliance Certificate of the chief financial officer of Borrower certifying as to Borrower's Senior Debt Leverage Ratio, in each case as required pursuant to Section 6.2(e) hereof, the Applicable Margin payable on the Loans shall be adjusted, from the date of Administrative Agent's receipt of such financial statements and Compliance Certificate until the date on which the next following quarterly financial statements are required to be delivered to the Administrative Agent, to the rate, calculated daily on the basis of a 360-day year and actual days elapsed, for the applicable type of Loan set forth opposite such range in the schedule below:
Senior Debt Base Eurodollar Rate Letter of Leverage Ratio Rate Loans Loans Credit - ------------------------------------------------------------------------- Less than 3.50:1.00 1.50% 3.50% 3.50% but greater than or equal to 3.00:1.00 - ------------------------------------------------------------------------- Less than 3.00:1.00 1.25% 3.25% 3.25% but greater than or equal to 2.50:1.00 - ------------------------------------------------------------------------ Less than 2.50:1.00 1.00% 3.00% 3.00% but greater than or equal to 2.00:1.00 - ------------------------------------------------------------------------ Less than 2.00:1.00 0.75% 2.75% 2.75%
If Borrower does not qualify for an adjustment in interest rates as set forth above for any given fiscal quarter of Borrower or if no Compliance Certificate and quarterly financial statements are delivered by the required date, the Applicable Margin shall be those set forth in clauses (a) and (b) above. 2.2. The definition of "Borrowing Availability" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Borrowing Availability" to read as follows: "Borrowing Availability" shall mean, for any Person, an amount equal to (a) (i) for the period beginning on the Effective Date and ending on the earlier of (A) December 31, 1998, and (B) the date immediately preceding the closing of a public offering of shares of common stock of the Borrower registered under the Securities Act of 1933, as amended, an amount equal to such Person's Adjusted Cash Flow for the twelve (12) month period most recently ended multiplied by 4.0; (ii) for the period beginning on the earlier of (A) January 1, 1999, and (B) the closing of a public offering of shares of common stock of the Borrower registered under the Securities Act of 1933, as amended, and ending on May 31, 1999, an amount equal to such Person's Adjusted Cash Flow for the twelve (12) month period most recently ended multiplied by 3.5; and (iii) thereafter, an amount equal to such Person's Adjusted Cash Flow for the twelve-month period most recently ended multiplied by 3.0; minus (b) the currently outstanding aggregate amount of Indebtedness permitted pursuant to Section 7.2(c) hereof. 2.3. The definition of "Cash Flow" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Cash Flow" to read as follows: "Cash Flow" shall mean, for any Person, for any period for which the same is computed, the sum of (a) such Person's net income (loss) for such period, plus (b) such Person's Interest Expense for such period, plus (c) such Person's depreciation and amortization for financial reporting purposes for such period, plus (d) income tax expense for such period, plus (e) with respect to the Borrower, to the extent deducted from the Borrower's net income (loss) for such period, any costs, not to exceed One Million Two Hundred Fifty-Two Thousand One Hundred Forty-Five Dollars ($1,252,145) in the aggregate, related to Information Technology Partners, Inc., which was merged with and into a Subsidiary of the Borrower, computed in each case on a consolidated basis for such Person and its consolidated Subsidiaries in accordance with GAAP. 2.4. The definition of "Calculation Period" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Calculation Period" to read as follows: "Calculation Period" shall mean the twelve month period most recently ended. 2.5. The definition of "Indebtedness" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Indebtedness" to read as follows: "Indebtedness" shall mean, as applied to any Person at any time, (a) all indebtedness, obligations or other liabilities of such Person (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, and any accrued interest, fees and charges relating thereto; (ii) under profit payment agreements or similar agreements; (iii) with respect to letters of credit issued for such Person's account; (iv) to pay the deferred purchase price of property or services, except (A) unsecured accounts payable and accrued expenses arising in the ordinary course of business which are less than sixty (60) days past due; and (B) the deferred portion of the purchase price, in connection with Acquisitions, which is contingent on the post-acquisition financial performance of the Person that is the subject of such Acquisition; or (v) Capital Lease Obligations; (b) all indebtedness, obligations or other liabilities of such Person or others secured by a Lien on any property of such Person, whether or not such indebtedness, obligations or liabilities are assumed by such Person, all as of such time; (c) all indebtedness, obligations or other liabilities of such Person in respect of any foreign exchange contract or Interest Hedge Agreement, net of liabilities owed to such Person by the counterparties thereon; (d) all Capital Stock (other than (i) Borrower's Series A Preferred Stock, (ii) Borrower's Series C Preferred Stock, or (iii) any warrants issued in connection with Borrower's Series A Preferred Stock or Borrower's Series C Preferred Stock or which are otherwise outstanding on July __, 1998) of such Person subject (upon the occurrence of any contingency or otherwise) to mandatory redemption prior to the first anniversary of the Maturity Date; and (e) indebtedness of others Guaranteed by such Person. 2.6. The definition of "Interest Coverage Ratio" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Interest Coverage Ratio" to read as follows: "Interest Coverage Ratio" shall mean, as to any Person, for any period, the ratio of (a) such Person's Cash Flow for such period to (b) such Person's Interest Expense (excluding from Interest Expense any non-cash Interest Expense (whether positive or negative) resulting from (i) the imputation, for financial reporting purposes, of an interest rate to any Subordinated Seller Note that is higher than the applicable interest rate set forth in such Subordinated Seller Note; (ii) any adjustment, whether positive or negative, made for financial reporting purposes to the value of any warrant for the purchase of Capital Stock of the Borrower caused by a change in the value of the shares of common stock of the Borrower; (iii) any accretion to the value of the Series A Preferred Stock and the Series C Preferred Stock required in accordance with GAAP and resulting from a book value of such preferred stock that is less than the redemption price for such preferred stock; and (iv) non-cash Interest Expense associated with deferred financing fees of $710,000 paid to Credit Agricole Indosuez) for such period, in each case calculated in accordance with GAAP. 2.7. Section 1.1 of the Loan Agreement is hereby amended by inserting, in appropriate alphabetical order, a new definition of "Series C Preferred Stock" to read as follows: "Series C Preferred Stock" shall mean the contemplated Series C Preferred Stock of Borrower. 2.8. Section 2.6(a) of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 2.6(a) to read as follows: 2.6 Letters of Credit. (a) Subject to the terms and conditions hereof and provided that there exists no Default or Event of Default, at any time and from time to time from the Effective Date to (but not including) the Maturity Date, the LC Issuer agrees, in reliance upon the agreement of the Lenders set forth in Section 2.6(c) below, to issue, for the account of the Borrower, such Letters of Credit as the Borrower may request by a Request for Letter of Credit (in the manner described in Section 2.6(b)), each in such form as may be requested from time to time by the Borrower and agreed to by the LC Issuer; provided, however, that after giving effect to the issuance of any such Letter of Credit, (i) the aggregate amount of all Letter of Credit Obligations of the Borrower outstanding at any one time does not exceed $2,500,000, and (ii) the aggregate amount of all outstanding Loans, together with all outstanding Letter of Credit Obligations, will not exceed the lesser of (A) the Commitment and (B) the Borrowing Availability of the Borrower. No Letter of Credit shall be issued by the LC Issuer under this Section 2.6(a) except to the extent reasonably necessary in connection with transactions in the ordinary course of business of the Borrower and its Subsidiaries. The expiration date of any such Letter of Credit shall not extend beyond the earliest of (i) one (1) year from the date of issuance thereof, (ii) the Maturity Date, and (iii) any date fixed for termination of the Commitment pursuant to Section 2.12 hereof. 2.9. Section 8.1 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 8.1 to read as follows: 8.1 Net Worth. The Borrower shall maintain, commencing April 1, 1998 and at all times thereafter, a Net Worth of not less than the sum of (a) $27,500,000, plus (b) effective upon the closing of any issuance of equity securities of Borrower, eighty percent (80%) of the amount by which Borrower's shareholders' equity is increased as a result of such issuance of equity securities, plus (c) effective January 1 of each year, an amount equal to the greater of (A) zero, and (B) seventy-five percent (75%) of Net Income of Borrower and its consolidated Subsidiaries for the immediately preceding fiscal year. 2.10. Section 8.2 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 8.2 to read as follows: 8.2 Leverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below a Leverage Ratio for each such quarter of not greater than the ratio set forth below opposite the applicable period during which such quarter occurs: Applicable Period Ratio Effective Date - 12/31/98 6.0:1.0 01/01/99 - 06/30/99 5.5:1.0 At all times thereafter 5.0:1.0 2.11. Section 8.3 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 8.3 to read as follows: 8.3 Senior Debt Leverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below a Senior Debt Leverage Ratio for each such quarter of not greater than the ratio set forth below opposite the applicable period during which such quarter occurs: Applicable Period Ratio Effective Date - 12/31/98 4.0:1.0 01/01/99 - 06/30/99 3.5:1.0 At all times thereafter 3.0:1.0 2.12. Section 8.4 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 8.4 to read as follows: 8.4 Interest Coverage Ratio. Borrower and its consolidated Subsidiaries shall maintain, on a consolidated basis, as of the end of each fiscal quarter of Borrower during the applicable periods set forth below, an Interest Coverage Ratio for such fiscal quarter of not less than the ratio set forth below opposite each such applicable period: Applicable Period Ratio Effective Date - 12/31/98 2.00:1.00 01/01/99 - 06/30/99 2.50:1.00 07/01/99 - 12/31/00 2.75:1:00 At all times thereafter 3.00:1.00 3. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Lenders and the Agents that all of Borrower's representations and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof as fully as though such representations and warranties had been made on the date hereof (except for changes therein occurring since the Effective Date in the ordinary course of business which do not constitute a Default or Event of Default hereunder, which are not, individually or in the aggregate, materially adverse to the assets, liabilities, financial conditions or results of operations of Obligors, or either of them, and which have, to the extent required, been disclosed to the Agents and/or the Majority Lenders pursuant to Section 6.8 of the Loan Agreement or otherwise) and with specific reference to this First Amendment and any and all documents executed in connection herewith. To induce the Lenders and the Agents to enter into this First Amendment and to continue to make advances to Borrower pursuant to the Loan Agreement, as amended hereby, Borrower and hereby represents and warrants that, on and as of the date of this First Amendment, no Event of Default, nor any event or condition which, with notice, lapse of time, or both, would constitute an Event of Default has occurred and is continuing under the Loan Agreement. As a further inducement of the Lenders and the Agents to enter into this First Amendment and to continue to make advances to Borrower pursuant to the Loan Agreement, as amended hereby, Borrower hereby represents and warrants to the Agents and the Lenders as follows: (a) Borrower has the power and authority to enter into this First Amendment and the other instruments, documents or agreements executed by Borrower pursuant hereto or in connection herewith (the "Amendment Documents") and to perform all of its respective obligations hereunder and thereunder; (b) the execution and delivery of this First Amendment and the Amendment Documents to which it is a party have been duly authorized by all necessary action (corporate or otherwise) on the part of Borrower; (c) the execution and delivery of this First Amendment and the Amendment Documents and performance thereof by the Borrower does not and will not violate the Articles or Certificate of Incorporation, By-laws or other organizational documents of Borrower and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower or its properties; and (d) the First Amendment and the Amendment Documents have been duly executed and delivered by Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms. 4. Waiver. The Agents and Lenders hereby waive any Default or Event of Default arising under the Loan Agreement solely as a result of Borrower's failure for the period commencing January 1, 1998 through April 1, 1998, to maintain the Net Worth required by Section 8.1 of the Loan Agreement (as in effect prior to the First Amendment). 5. Expenses. Borrower agrees to pay, immediately upon demand by Lenders and Agents, all costs, expenses, attorneys' fees, and other charges and expenses incurred by Lenders and Agents in connection with the negotiation, preparation, execution and delivery of this First Amendment. 6. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein or in any document executed in conjunction herewith, shall constitute an Event of Default under the Loan Documents and the Lenders and the Agents shall be entitled to exercise all rights and remedies they may have under the Loan Agreement, any of the other Loan Documents and applicable law. 7. Conditions Precedent. Subject to the other terms and conditions of this First Amendment, the amendments and waivers set forth herein shall not become effective, and the Lenders shall have no obligation to fund any Loans, unless and until (a) the Administrative Agent shall have received this First Amendment, duly executed and delivered by Borrower, the Lenders, the Agents and the LC Issuer, and (b) the Administrative Agent shall have received a reaffirmation of each of the Loan Documents executed by each of the Subsidiaries and Affiliates of Borrower party to the Loan Documents, duly executed and delivered to the Lenders and the Agents, in form and substance satisfactory to the Administrative Agent and its counsel. Once all the conditions precedent set forth above have been fulfilled, this First Amendment will be deemed effective as of April 1, 1998. 8. References in Loan Documents. All references in the Loan Agreement and the other Loan Documents to the Loan Agreement shall hereafter be deemed to be references to the Loan Agreement as amended hereby and as the same may hereafter be amended from time to time. 9. No Claims, Offset. Borrower hereby represents, warrants, acknowledges and agrees to and with the Lenders and the Agents that (a) Borrower does not hold or claim any right of action, claim, cause of action or damages, either at law or in equity, against the Lenders or the Agents which arises from, may arise from, allegedly arise from, is based upon or is related in any manner whatsoever to the Loan Agreement and the Loan Documents or which is based upon acts or omissions of the Lenders or the Agents in connection therewith and (b) the Obligations are absolutely owed to the Agents and the Lenders, without offset, deduction or counterclaim. 10. No Novation. The terms of this First Amendment are not intended to and do not serve to effect a novation as to the Loan Agreement. The parties hereto expressly do not intend to extinguish any debt or security interest created pursuant to the Loan Agreement. Instead, it is the express intention of the parties hereto to affirm the Loan Agreement and the security created pursuant thereto. 11. Limitation of First Amendment. Except as expressly set forth herein, this First Amendment shall not be deemed to waive, amend or modify any term or condition of the Loan Agreement or any of the other Loan Documents, each of which is hereby ratified and reaffirmed in all respects, and which shall remain in full force and effect without modification or waiver, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 12. Counterparts. This First Amendment may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together, will be deemed to be but one and the same agreement. 13. Successors and Assigns. This First Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. Notwithstanding any other language in this First Amendment or the Loan Agreement, any one of the Lenders may at any time assign all or any portion of its rights under the Loan Agreement, as amended hereby, in accordance with Section 12.3 of the Loan Agreement. 14. Section References. Section titles and references used in this First Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 15. Further Assurances. Borrower agrees to take such further action as the Lenders and the Agents shall reasonably request in connection herewith to evidence the amendments herein contained to the Loan Agreement. 16. Governing Law. This First Amendment shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law. [Signatures on Following Page] IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Collateral Agent, the Co-Agent, the LC Issuer and the Lenders have caused their duly authorized officers to set their hands and seals as of the day and year first above written. "Borrower" IT PARTNERS, INC. By: /s/ Daniel J. Klein ------------------- Daniel J. Klein Chairman and Chief Executive Officer Attest: /s/ Jamie E. Blech ---------------- Jamie E. Blech Secretary [CORPORATE SEAL] [Signatures continued on following page] [Signatures continued from previous page] "Administrative Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake --------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] "Collateral Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Bibinger ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake -------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] "Co-Agent" CREDIT AGRICOLE INDOSUEZ By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President [Signatures continued on following page] [Signatures continued from previous page] "Lenders" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake --------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] CREDIT AGRICOLE INDOSUEZ By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President [Signatures continued on following page] [Signatures continued from previous page] "LC Issuer" CREDITANSTALT CORPORATE FINANCE, INC. By:/s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By:/s/ Carl G. Drake Carl G. Drake Vice President [Signatures Continued on Following Page] [Signatures Continued from Previous Page] ACKNOWLEDGED AND AGREED: C.N.S., INC.; KANDL DATA PRODUCTS, INC.; A-COM, INC.; FINANCIAL SYSTEM CONSULTING, INC.; SEQUOIA DIVERSIFIED PRODUCTS, INC.; INCLINE CORP.; CALL BUSINESS SYSTEMS, INC.; SERVINET CONSULTING GROUP, INC. By: /s/ Daniel J. Klein ------------------- Daniel J. Klein Chairman and Chief Executive Officer Attest: /s/ Janie E. Blech ------------------ Jamie E. Blech Secretary PAGE> SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the "Second Amendment") is made and entered into as of the 27th day of July, 1998, by and among IT PARTNERS, INC., a Delaware corporation (the "Borrower"), each of the Lenders signatory hereto (hereinafter referred to individually as a "Lender" and collectively as the "Lenders"), CREDITANSTALT CORPORATE FINANCE, INC., as the letter of credit issuer (in such capacity, the "LC Issuer"), CREDIT AGRICOLE INDOSUEZ, as co-agent for the Lenders (in such capacity, together with its successors and assigns, the "Co-Agent") and CREDITANSTALT CORPORATE FINANCE, INC., as collateral agent for the Lenders (in such capacity, together with its successors and assigns, the "Collateral Agent") and administrative agent for the Lenders (in such capacity, together with its successors and assigns, the "Administrative Agent"; the Co-Agent, Collateral Agent and Administrative Agent are collectively referred to as the "Agents" and individually referred to as an "Agent"). W I T N E S S E T H: WHEREAS, Borrower, the Lenders, the LC Issuer and the Agents are parties to that certain Amended and Restated Loan and Security Agreement dated as of March 31, 1998 (as the same has been and may be further amended, restated and supplemented from time to time, the "Loan Agreement"), which currently provides for a revolving credit facility (the "Loan" or "Loans") in the aggregate principal amount of up to Seventy Million Dollars ($70,000,000) at any one time outstanding; and WHEREAS, the Borrower has requested that the Lenders, the LC Issuer and the Agents amend the Loan Agreement as provided herein; and WHEREAS, the Lenders, the LC Issuer and the Agent are willing to agree to such request, subject to the terms and conditions of this Second Amendment; NOW, THEREFORE, for and in consideration of the premises, the terms and conditions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Defined Terms. Defined terms used herein, as indicated by the initial capitalization thereof, shall have the same respective meanings ascribed to such terms in the Loan Agreement unless otherwise specifically defined herein. 2. Amendments. 2.1. The definition of "Interest Expense" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Interest Expense" to read as follows: "Interest Expense" shall mean, for any period, as to any Person, the sum of (a) total interest expense, whether paid, accrued or capitalized (including the interest component of Capital Lease Obligations), of such Person, including, but not limited to, all origination and other fees, all amortization of original issue discount, the net amount payable under any Interest Hedge Agreement between such Person and any other Person, plus (b) with respect to the Borrower, dividends on the Series C Preferred Stock of the Borrower, to the extent paid in cash during such period, computed in each case on a consolidated basis for such Person and its consolidated Subsidiaries in accordance with GAAP. 2.2. The definition of "Series C Preferred Stock" contained in Section 1.1 of the Loan Agreement is hereby amended by deleting such definition in its entirety and substituting in lieu thereof a new definition of "Series C Preferred Stock" to read as follows: "Series C Preferred Stock" shall mean the 12% Series C Senior Redeemable Preferred Stock of the Borrower. 2.3. Section 1.1 of the Loan Agreement is hereby amended by inserting, in appropriate alphabetical order, new definitions of "Qualified Stock," "Qualifying IPO," "Second Amendment Effective Date," "Series A Preferred Stock," "Series B Preferred Stock," "Series C Certificate of Designation," "Series C Investor" and "Series C Stock Purchase Agreement" to read as follows: "Qualified Stock" shall mean collectively (a) shares of common stock of Borrower of a class currently authorized by Borrower's Certificate of Incorporation; (b) the Series B Preferred Stock; and (c) other preferred stock of Borrower provided that (i) dividends and/or distributions do not accrue or cumulate on such stock, and (ii) such stock is not redeemable at the option of the holder thereof (whether upon the happening of any contingency or otherwise) on or prior that date which is one year after the Maturity Date. The Series A Preferred Stock and Series C Preferred Stock shall not constitute Qualified Stock hereunder. "Qualifying IPO" shall mean the sale of common stock of Borrower which (a) is registered under the Securities Act of 1933, as amended; and (b) results in proceeds to Borrower of not less than $40,000,000, net of underwriter discounts and commissions. "Second Amendment Effective Date" shall mean the date on which all conditions precedent to the effectiveness to the Second Amendment to Amended and Restated Loan and Security Agreement have been fulfilled and such Second Amendment has become effective in accordance with its terms. "Series A Preferred Stock" shall mean the Series A Preferred Stock of the Borrower. "Series B Preferred Stock" shall mean the Series B Preferred Stock of the Borrower. "Series C Certificate of Designation" shall mean that certain Certificate of Designation of Preferences and Rights of 12% Series C Senior Redeemable Preferred Stock of IT Partners, Inc., adopted by the Board of Directors of the Borrower on July 27, 1998. "Series C Investor" shall mean FBR Business Development Capital, a Delaware business trust, and, if more than seven hundred (700) shares of Series C Preferred Stock are issued, Wachovia Capital Associates, Inc. "Series C Stock Purchase Agreement" shall mean that certain 12% Series C Senior Redeemable Preferred Stock and Warrant Purchase Agreement, dated as of July 27, 1998, by and between the Borrower and the Series C Investor. 2.4. Section 5 of the Loan Agreement is hereby amended by inserting a new Section 5.32 to read as follows: 5.32 Purchase Agreement; Issuance of Preferred Stock (a) The Series C Purchase Agreement is in full force and effect as of the Second Amendment Effective Date, has not been terminated, rescinded or withdrawn, and no portion thereof has been amended or waived by any party. All representations and warranties of Borrower, and to the best of Borrower's knowledge, all representations and warranties of the Series C Investor contained in the Series C Stock Purchase Agreement are true and correct in all material respects as of the date hereof with the same effect as though made on and as of the date hereof. As of the date hereof, and giving effect to the transactions contemplated hereby, there does not exist any default, event of default or any event or conditions which, with notice, lapse of time or both, would constitute such a default or event of default under the Series C Stock Purchase Agreement. (b) The creation and the issuance of the Series C Preferred Stock has been duly authorized by all corporate action necessary on the part of Borrower, 354,169.571 shares of Series A Preferred Stock have been duly and validly issued and remain outstanding, no shares of Series B Preferred Stock have been issued or are outstanding and 700 shares of Series C Preferred Stock have been duly and validly issued to the Series C Investor. Such issuance of shares of the Series C Preferred Stock complied with all applicable laws, rules, regulations applicable thereto, including, but not limited to, the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, and all applicable state securities or Blue Sky laws. (c) Borrower has received aggregate gross cash proceeds of not less than $7,000,000 from the issuance of 700 shares, or $10,000,000 from the issuance of 1,000 shares, of the Series C Preferred Stock and from the issuance of the warrants described in the Series C Stock Purchase Agreement. 2.5. Section 6.2 of the Loan Agreement is hereby amended by deleting subsection (g) thereof in its entirety and substituting in lieu thereof a new subsection (g) to read as follows: (g) Promptly after the sending or filing thereof, as the case may be, copies of any definitive proxy statements, financial statements or reports which the Borrower sends to its shareholders (including, but not limited to, any such statements or reports required to be delivered to the Series C Investor pursuant to the Series C Stock Purchase Agreement or the Series C Certificate of Designation) and copies of any regular periodic and special reports or registration statements which the Borrower files with the Securities and Exchange Commission (or any Governmental Authority substituted therefor), including, but not limited to, all Form 10-K and Form 10-Q reports, if any, or any report or registration statement which the Borrower files with any national securities exchange; 2.6. Section 7.7 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 7.7 to read as follows: 7.7 Issuance of Stock. The Borrower shall not, and shall not permit any of its Subsidiaries to, issue any shares of Capital Stock or other ownership interests in the Borrower or any of its Subsidiaries, except that the Borrower may issue (a) shares of common stock of a class currently authorized by Borrower's Certificate of Incorporation; (b) shares of Series B Preferred Stock of the Borrower; (c) additional shares of Borrower's Series A Preferred Stock as dividends on outstanding shares of Series A Preferred Stock as provided in the terms of said Series A Preferred Stock as in effect on the date hereof; and (d) up to 1,000 shares of Series C Preferred Stock; provided, however, that the Borrower shall use the proceeds of the sale of such Series C Preferred Stock for repayment of the Obligations, costs and expenses relating to the closing of Acquisitions, general working capital needs, and for costs, fees and expenses in connection with the issuance or sale of Capital Stock of the Borrower that is or is to be registered under the Securities Act of 1933, as amended; provided, further, that commencing on the date of the initial issuance of the Series C Preferred Stock, the Borrower shall not use the proceeds of the sale of such Series C Preferred Stock, the proceeds of Loans or any combination thereof, to pay more than Two Million Dollars ($2,000,000.00) of costs, fees or expenses (including, but not limited to, audit, legal and printing costs) arising from any proposed initial public offering of shares of Capital Stock of the Borrower that is or is to be registered under the Securities Act of 1933, as amended, whether or not such public offering is ultimately consummated. 2.7. Section 7.12 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 7.12 to read as follows: 7.12 Amendments and Prepayments. The Borrower shall not (a) amend, supplement or otherwise modify (i) the Preferred Stock and Warrant Purchase Agreement; (ii) the Subordinated Seller Notes; (iii) the Series C Stock Purchase Agreement; or (iv) the Series C Certificate of Designation; or (b) prepay any Subordinated Debt; provided, however, that Borrower may prepay not more than $10,500,000 of Subordinated Seller Notes concurrently with the closing of a Qualifying IPO. 2.8. Section 8.5 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 8.5 to read as follows: 8.5 Dividends. Neither the Borrower nor any of its Subsidiaries shall declare or pay any dividends on, or make any distribution with respect to, the shares of any class of their Capital Stock, or purchase, redeem, acquire, defease or retire any shares of their Capital Stock, or take any action having an effect equivalent to the foregoing except (i) Borrower may declare and pay dividends to holders of Series A Preferred Stock payable solely in additional shares of Series A Preferred Stock; (ii) Borrower may, commencing 18 months after the Second Amendment Effective Date, declare and pay cash dividends to holders of Series C Preferred Stock; provided, however, that at the time such payment is made, there exists no Default or Event of Default nor any event or condition which, giving effect to the payment of such dividend (both as if such payment and been made on the last day of the fiscal quarter most recently ended and as if made on the actual date of payment) would result in a Default or Event of Default; (iii) (A) upon the closing of a Qualifying IPO, Borrower may redeem the outstanding shares of Series C Preferred Stock to the extent such redemption is required by Section 4(a)(i) of the Series C Certificate of Designation; and (B) if a Qualifying IPO has not occurred by the third (3rd) anniversary of the issuance of the Series C Preferred Stock, Borrower may redeem the outstanding shares of the Series C Preferred Stock, provided that, after giving effect to such redemption, there exists no Default or Event of Default; provided, further, that solely for purposes of determining whether a Default or Event of Default exists for purposes of this Section 8.5(ii) and (iii)(B), any amendment to Articles 8 or 9 of this Agreement closing after the Second Amendment Effective Date shall not be given effect; and (iv) any Subsidiary of the Borrower may declare and pay dividends to the Borrower or to any wholly-owned Subsidiary of the Borrower. 2.9. Section 9.17 of the Loan Agreement is hereby amended by deleting such section in its entirety and substituting in lieu thereof a new Section 9.17 to read as follows: 9.17 Change of Control. Either (a) a Person or "group" (within the meaning of the Securities Exchange Act of 1934), other than Daniel J. Klein and Jamie E. Blech, acquires or obtains beneficial ownership of securities (including options) of the Borrower representing a percentage of the ordinary voting power of the Borrower that is greater than the percentage of the ordinary voting power represented by the shares of Capital Stock owned, beneficially and of record, with power to vote, by Daniel J. Klein and Jamie E. Blech; (b) there shall occur a change in the composition of the Board of Directors of the Borrower such that the current directors (or directors designated or approved by such directors) shall not have a majority of the ordinary voting power of the Borrower; or (c) there shall occur a "Change in Control" (as such term is defined in the Series C Certificate of Designation). 2.10. Section 9 of the Loan Agreement is hereby amended by inserting a new Section 9.19 to read as follows: 9.19 Event of Noncompliance. Any "Event of Noncompliance" (as such term is defined in the Series C Stock Purchase Agreement) shall occur. 3. Representations and Warranties; No Default. Borrower hereby represents and warrants to the Lenders and the Agents that all of Borrower's representations and warranties contained in the Loan Agreement and the other Loan Documents are true and correct in all material respects on and as of the date hereof as fully as though such representations and warranties had been made on the date hereof (except for changes therein occurring since the Effective Date in the ordinary course of business which do not constitute a Default or Event of Default hereunder, which are not, individually or in the aggregate, materially adverse to the assets, liabilities, financial conditions or results of operations of Obligors, or either of them, and which have, to the extent required, been disclosed to the Agents and/or the Majority Lenders pursuant to Section 6.8 of the Loan Agreement or otherwise) and with specific reference to this Second Amendment and any and all documents executed in connection herewith. To induce the Lenders and the Agents to enter into this Second Amendment and to continue to make advances to Borrower pursuant to the Loan Agreement, as amended hereby, Borrower and hereby represents and warrants that, on and as of the date of this Second Amendment, no Event of Default, nor any event or condition which, with notice, lapse of time, or both, would constitute an Event of Default has occurred and is continuing under the Loan Agreement. As a further inducement of the Lenders and the Agents to enter into this Second Amendment and to continue to make advances to Borrower pursuant to the Loan Agreement, as amended hereby, Borrower hereby represents and warrants to the Agents and the Lenders as follows: (a) Borrower has the power and authority to enter into this Second Amendment and the other instruments, documents or agreements executed by Borrower pursuant hereto or in connection herewith (the "Amendment Documents") and to perform all of its respective obligations hereunder and thereunder; (b) the execution and delivery of this Second Amendment and the Amendment Documents to which it is a party have been duly authorized by all necessary action (corporate or otherwise) on the part of Borrower; (c) the execution and delivery of this Second Amendment and the Amendment Documents and performance thereof by the Borrower does not and will not violate the Articles or Certificate of Incorporation, By-laws or other organizational documents of Borrower and does not and will not violate or conflict with any law, order, writ, injunction, or decree of any court, administrative agency or other governmental authority applicable to Borrower or its properties; and (d) the Second Amendment and the Amendment Documents have been duly executed and delivered by Borrower and constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms. 4. Expenses. Borrower agrees to pay, immediately upon demand by Lenders and Agents, all costs, expenses, attorneys' fees, and other charges and expenses incurred by Lenders and Agents in connection with the negotiation, preparation, execution and delivery of this Second Amendment. 5. Defaults Hereunder. The breach of any representation, warranty or covenant contained herein or in any document executed in connection herewith, or the failure to observe or comply with any term or agreement contained herein or in any document executed in conjunction herewith, shall constitute an Event of Default under the Loan Documents and the Lenders and the Agents shall be entitled to exercise all rights and remedies they may have under the Loan Agreement, any of the other Loan Documents and applicable law. 6. Conditions Precedent. Subject to the other terms and conditions of this Second Amendment, the amendments set forth herein shall not become effective, and the Lenders shall have no obligation to fund any Loans, unless and until (a) the Administrative Agent shall have received this Second Amendment, duly executed and delivered by Borrower, the Lenders, the Agents and the LC Issuer, (b) the Administrative Agent shall have received a reaffirmation of each of the Loan Documents executed by each of the Subsidiaries and Affiliates of Borrower party to the Loan Documents, duly executed and delivered to the Lenders and the Agents, in form and substance satisfactory to the Administrative Agent and its counsel, and (c) Borrower shall have issued the Series C Preferred Stock to the Series C Investor on terms and conditions acceptable to the Majority Lenders. 7. References in Loan Documents. All references in the Loan Agreement and the other Loan Documents to the Loan Agreement shall hereafter be deemed to be references to the Loan Agreement as amended hereby and as the same may hereafter be amended from time to time. 8. No Claims, Offset. Borrower hereby represents, warrants, acknowledges and agrees to and with the Lenders and the Agents that (a) Borrower does not hold or claim any right of action, claim, cause of action or damages, either at law or in equity, against the Lenders or the Agents which arises from, may arise from, allegedly arise from, is based upon or is related in any manner whatsoever to the Loan Agreement and the Loan Documents or which is based upon acts or omissions of the Lenders or the Agents in connection therewith and (b) the Obligations are absolutely owed to the Agents and the Lenders, without offset, deduction or counterclaim. 9. No Novation. The terms of this Second Amendment are not intended to and do not serve to effect a novation as to the Loan Agreement. The parties hereto expressly do not intend to extinguish any debt or security interest created pursuant to the Loan Agreement. Instead, it is the express intention of the parties hereto to affirm the Loan Agreement and the security created pursuant thereto. 10. Limitation of Second Amendment. Except as expressly set forth herein, this Second Amendment shall not be deemed to waive, amend or modify any term or condition of the Loan Agreement or any of the other Loan Documents, each of which is hereby ratified and reaffirmed in all respects, and which shall remain in full force and effect without modification or waiver, nor to serve as a consent to any matter prohibited by the terms and conditions thereof. 11. Counterparts. This Second Amendment may be executed in any number of counterparts, and any party hereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original and all of which, taken together, will be deemed to be but one and the same agreement. 12. Successors and Assigns. This Second Amendment shall be binding upon and inure to the benefit of the successors and permitted assigns of the parties hereto. Notwithstanding any other language in this Second Amendment or the Loan Agreement, any one of the Lenders may at any time assign all or any portion of its rights under the Loan Agreement, as amended hereby, in accordance with Section 12.3 of the Loan Agreement. 13. Section References. Section titles and references used in this Second Amendment shall be without substantive meaning or content of any kind whatsoever and are not a part of the agreements among the parties hereto evidenced hereby. 14. Further Assurances. Borrower agrees to take such further action as the Lenders and the Agents shall reasonably request in connection herewith to evidence the amendments herein contained to the Loan Agreement. 15. Governing Law. This Second Amendment shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to principles of conflicts of law. [Signatures on Following Page] IN WITNESS WHEREOF, the Borrower, the Administrative Agent, the Collateral Agent, the Co-Agent, the LC Issuer and the Lenders have caused their duly authorized officers to set their hands and seals as of the day and year first above written. "Borrower" IT PARTNERS, INC. By: /s/ Daniel J. Klein ------------------- Daniel J. Klein Chairman and Chief Executive Officer Attest: /s/ Jamie E. Blech ------------------- Jamie E. Blech Secretary [CORPORATE SEAL] [Signatures continued from previous page] "Administrative Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake --------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] "Collateral Agent" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Bibinger ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake -------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] "Co-Agent" CREDIT AGRICOLE INDOSUEZ By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President [Signatures continued on following page] [Signatures continued from previous page] "Lenders" CREDITANSTALT CORPORATE FINANCE, INC. By: /s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By: /s/ Carl G. Drake --------------------- Carl G. Drake Vice President [Signatures continued on following page] [Signatures continued from previous page] CREDIT AGRICOLE INDOSUEZ By: /s/ Mitchell Goldstein -------------------------- Name:Mitchell Goldstein Title:Vice President By: /s/ Patricia Frankel --------------------------- Name:Patricia Frankel Title:First Vice President [Signatures continued on following page] [Signatures continued from previous page] "LC Issuer" CREDITANSTALT CORPORATE FINANCE, INC. By:/s/ Robert M. Biringer ---------------------- Robert M. Biringer Executive Vice President By:/s/ Carl G. Drake Carl G. Drake Vice President [Signatures Continued on Following Page] [Signatures Continued from Previous Page] ACKNOWLEDGED AND AGREED: C.N.S., INC.; KANDL DATA PRODUCTS, INC.; A-COM, INC.; FINANCIAL SYSTEM CONSULTING, INC.; SEQUOIA DIVERSIFIED PRODUCTS, INC.; INCLINE CORP.; CALL BUSINESS SYSTEMS, INC.; SERVINET CONSULTING GROUP, INC. By: /s/ Daniel J. Klein ------------------- Daniel J. Klein Chairman and Chief Executive Officer Attest: /s/ Jamie E. Blech ------------------ Jamie E. Blech Secretary EX-10.10 19 1997 AMENDED LONG TERM INCENTIVE PLAN IT PARTNERS, INC. AMENDED AND RESTATED 1997 LONG-TERM INCENTIVE PLAN 1. Definitions In this Plan, except where the context otherwise indicates, the following definitions apply: 1.1 "Agreement" means a written agreement implementing an Award. 1.2 "Restricted Stock and Nonqualified Stock Option Agreement" means a Restricted Stock and Nonqualified Stock Option Agreement executed by and between the Corporation and an Optionee or Grantee. 1.3 "Award" means a grant of an Option or Right or an award of Restricted Stock or Incentive Shares. 1.4 "Subsidiary" means a "subsidiary corporation" as defined in section 425(f) of the Code. 1.5 "Board" means the Board of Directors of the Corporation. 1.6 "Change of Control" means either: (a) the acquisition, other than from the Corporation, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of fifty percent (50%) or more of the then outstanding shares of common stock of the Corporation, but excluding for this purpose any such acquisition by (A) the Corporation, any Subsidiary of the Corporation, or any other entity a majority of which is owned, directly or indirectly, by the beneficial owners of a majority of the outstanding shares of voting common stock of the Corporation, or (B) any corporation with respect to which, following such acquisition, more than fifty percent (50%) of the then outstanding shares of voting common stock of such corporation is then beneficially owned, directly or indirectly, by the Corporation, a Subsidiary of the Corporation, or the individuals and entities who were the beneficial owners, directly or indirectly, of the voting common stock of the Corporation immediately prior to such acquisition; or (b) approval by the holders of the stock of the Corporation of a reorganization, merger or consolidation, in each case, with respect to which the Corporation, any Subsidiary of the Corporation, or any other entity a majority of which is owned, directly or indirectly, by the beneficial owners of a majority of the outstanding shares of voting Common Stock of the Corporation, do not, alone or in combination, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent (50%) or more of the then outstanding shares of voting common stock of the corporation resulting from such reorganization, merger or consolidation. 1.7 "Code" means the Internal Revenue Code of 1986, as amended. 1.8 "Committee" means the committee of the Board appointed by the Board to administer the Plan. Unless otherwise determined by the Board, the Compensation Committee of the Board shall be the Committee. 1.9 "Common Stock" means the common stock, par value $.01 per share, of the Corporation. 1.10 "Consultant" means a person engaged by the Corporation, or a parent or Subsidiary of the Corporation, pursuant to a written agreement, to perform consulting services with respect to the business of the Corporation. 1.11 "Corporation" means IT Partners, Inc. 1.12 "Date of Exercise". means the date on which the Corporation receives notice of the exercise of an Option or Right in accordance with the terms of Article 8. 1.13 "Date of Grant" means the date on which an Option or Right is granted or Restricted Stock or Incentive Shares are awarded under the Plan. 1 .14 "Director" means a member of the Board of the Corporation or an Subsidiary. 1.15 "Employee" means any employee of the Corporation or of a Subsidiary, including an Employee Director or any person who has been hired to be an employee of the Corporation or a Subsidiary. 1.16 "Employee Director" means a Director who is also an Employee. 1.17 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.18 "Fair Market Value" means on any applicable determination date shall mean (i) if the stock is listed or admitted to trade on a securities exchange, the closing price of the stock, on such day, on the principal securities exchange on which the stock is so listed or admitted to trade, or, if there is no such reported sale on such date, the average closing bid and asked prices on such day, or (if none) then the closing price of the stock or (if none) such average, as reported on the next preceding date on which there was such reported activity in such shares (such determination or earlier date being hereinafter referred to as the "applicable trading date"); (ii) if the stock is not listed or admitted to trade on a securities exchange, the last reported sales price for the stock or (if none) the average of the last reported bid and asked prices on the applicable trading date, as reported by the principal reputable quotation system available to the Committee; (iii) if the stock is not listed or admitted to trade on a securities exchange and no such reported closing sale price or closing bid and asked prices are available, the average of the reported high bid and low asked price for the stock on the applicable trading date, as reported by a reputable quotation source designated by the Committee; or (iv) if the stock is not listed or admitted to trade on a securities exchange, trading is not so reported, and bid and asked prices are not available on a reasonably current basis, the value as established by the Committee in good faith at such time for purposes of this Plan. 1.19 "Grantee" means an Employee, Director or Consultant to whom Restricted Stock has been awarded pursuant to Article 9 or Incentive Shares have been awarded pursuant to Article 10. 1.20 "Incentive Shares" means Shares awarded under the Plan pursuant to the provisions of Article 10. 1.21 "Incentive Stock Option" means an Option granted under the Plan that qualifies as an incentive stock option under Section 422 of the Code and that the Corporation designates as such in the Agreement granting the option. 1.22 "Mature Shares" means Shares held by the Optionee free and clear of any liens or encumbrances for at least six months. 1.23 "Nonqualified Stock Option" means an Option granted under the Plan that is not an Incentive Stock Option. 1.24 "Option" means an option to purchase Shares granted under the Plan in accordance with the terms of Article 6. 1.25 "Optionee" means an Employee, Director or Consultant to whom an Option or Right has been granted. 1.26 "Option Period" means the period during which an Option may be exercised. 1.27 "Option Price" means the price per Share at which an Option may be exercised. The Option Price shall be determined by the Committee and shall not be less than the Fair Market Value determined as of the Date of Grant. Notwithstanding the foregoing, in the case of an Incentive Stock Option granted to an Optionee who (applying the rules of Section 424(d) of the Code) owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the corporation or a Subsidiary (a "Ten-Percent Stockholder"), the Option Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value on the Date of Grant. 1.28 "Performance Goals" means performance goals established by the Committee which may be based on earnings or earnings growth, sales, return on assets, equity or investment, regulatory compliance, satisfactory internal or external audits, improvement of financial ratings, achievement of balance sheet or income statement objectives, or any other objective goals established by the Committee, and may be absolute in their terms or measured against or in relationship to other companies comparably, similarly or otherwise situated. Such performance standards may be particular to an employee or the department, branch, Subsidiary or other division in which he or she works, or may be based on the performance of the Corporation generally, and may cover such period as may be specified by the Committee. 1.29 "Plan" means the IT Partners, Inc. Amended and Restated 1997 Long-Term Incentive Plan. 1.30 "Related Option" means the Option in connection with which, or by amendment to which, a specified Right is granted. 1.31 "Related Right" means the Right granted in connection with, or by amendment to, a specified Option. 1.32 "Restricted Stock" means Shares awarded under the Plan pursuant to the provisions of Article 9. 1.33 "Right" means a stock appreciation right granted under the Plan in accordance with the terms of Article 7. 1.34 "Right Period" means the period during which a Right may be exercised. 1.35 "Share" means a share of Common Stock of the Corporation. 2. Purpose The Plan is intended to assist the Corporation and its Subsidiaries in attracting and retaining Employees, Directors and Consultants of outstanding ability and to promote the identification of their interests with those of the stockholders of the Corporation. 3. Administration The Committee shall administer the Plan and shall have plenary authority, in its discretion, to award Options, Rights, Restricted Stock and Incentive Shares to Employees, Directors or Consultants subject to the provisions of the Plan. The committee shall have plenary authority and discretion, subject to the provisions of the Plan, to determine the terms of all Awards (which terms need not be identical), including, but not limited to, the exercise price of Options, the time or times at which Awards are made, the number of Shares covered by Awards, whether an Option shall be an Incentive Stock Option or a Nonqualified Stock Option, and the period during which Options and Rights may be exercised and Restricted Stock shall be subject to restrictions. In making these determinations, the Committee may take into account the nature of the services rendered by the Award recipients, their present and potential contributions to the success of the Corporation and its Subsidiaries, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall have plenary authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it and to make all other determinations deemed necessary or advisable for the administration of the Plan. The determinations of the Committee on the matters referred to in this Article 3 shall be binding and final. 4. Eligibility Options, Rights, Restricted Stock and Incentive Shares may be granted or awarded only to Employees, Directors or Consultants. 5. Stock Subject to the Plan 5.1 The maximum number of Shares that may be issued under the Plan is 2,250,000. The maximum number of shares that may be issued to any one employee is 2,250,000. 5.2 If an Option or Right expires or terminates for any reason (other than termination by virtue of the exercise of a Related Option or Related Right, as the case may be), without having been fully exercised, if Shares of Registered Stock are forfeited or if Incentive Shares are not issued or are forfeited, the unissued or forfeited Shares which had been subject to the Award shall become available for the grant of additional Awards. 5.3 Upon exercise of a Right (regardless of whether the Right is settled in cash or Shares), the number of Shares with respect to which the Right is exercised shall be charged against the number of Shares issuable under the Plan and shall not become available for the grant of other Awards. 6. Options 6.1 Options granted under the Plan to Optionees shall be either Incentive Stock Options or Nonqualified Stock Options, as designated by the Committee. Each Option granted under the Plan shall be clearly identified either as a Nonqualified Stock Option or an Incentive Stock Option and shall be evidenced by an Agreement that specifies the terms and conditions of the grant. Options granted to Optionees shall be subject to the terms and conditions set forth in this Article 6 and such other terms and conditions not inconsistent with this Plan as the Committee may specify. All Incentive Stock Options granted under the Plan shall comply with the provisions of the Code governing incentive stock options and with all other applicable rules and regulations. 6.2 The Option Period for options granted to Optionees shall be determined by the Committee and specifically set forth in the Agreement, provided, however, that an Option shall not be exercisable after ten years (five years in the case of an Incentive Stock Option granted to a Ten- Percent Stockholder) from its Date of Grant. 6.3 The Committee, in its discretion, may provide in an Agreement for the right of the Optionee to surrender to the Corporation an Option (or a portion thereof) that has become exercisable and to receive upon such surrender, without any payment to the Corporation (other than required tax withholding amounts or as otherwise provided in Section 16) that number of Shares (equal to the highest whole number of Shares) having an aggregate Fair Market Value as of the date of surrender equal to that number of Shares subject to the Option (or portion thereof) being surrendered multiplied by an amount equal to the excess of (i) the Fair Market Value on the date of surrender over (H) the Option Price, plus an amount of cash equal to the Fair Market Value of any fractional Share to which the Optionee would be entitled but for the parenthetical above relating to whole number of Shares. Any such surrender shall be treated as the exercise of the Option (or portion thereof). 6.4 If an Option is intended to qualify as an Incentive Stock Option, the Option must be granted within ten years from the date the Plan is adopted or the date the Plan is approved by the stockholders of the Corporation, whichever is earlier. 6.5 To the extent that the aggregate " fair market value" of stock with respect to which Incentive Stock Options first become exercisable by an Optionee in any calendar year exceeds $100,000, such options shall be treated as Nonqualified Stock Options. For this purpose, the "fair market value" of the stock subject to options shall be determined as of the date the Options were awarded. In reducing the number of Options treated as Incentive Stock Options to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Committee may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an Incentive Stock Option. 7. Rights 7.1 Rights granted under the Plan shall be evidenced by an Agreement specifying the terms and conditions of the grant. A Right may be granted under the Plan: (a) in connection with, and at the same time as, the grant of an Option under (b) by amendment of an outstanding Option granted under the Plan; or (c) independently of any Option granted under the Plan. A Right granted under clause (a) or (b) of the preceding sentence is a Related Right. A Related Right may, in the Committee's discretion, apply to all or a portion of the Shares subject to the Related Option. 7.2 A Right may be exercised in whole or in part as provided in the applicable Agreement, and, subject to the terms of the Agreement, entitles its optionee to receive, without payment to the Corporation (but subject to required tax withholding or as otherwise provided in Section 16), either cash or that number of Shares (equal to the highest whole number of Shares), or a combination thereof, in an amount or having a Fair Market Value determined as of the Date of Exercise not to exceed the number of Shares subject to the portion of the Right exercised multiplied by an amount equal to the excess of (i) the Fair Market Value on the Date of Exercise of the Right over (ii) either (A) the Fair Market Value on the Date of Grant of the Right if it is not a Related Right, or (B) the Option Price as provided in the Related Option if the Right is a Related Right. 7.3 The Right Period shall be determined by the Committee and specifically set forth in the Agreement, subject to the following conditions: (a) a Right will expire no later than the earlier of (A) ten years from the Date of Grant or (B) in the case of a Related Right, the expiration of the Related Option; (b) a Right may be exercised only when the Fair Market Value on the Date of Exercise exceeds either (A) the Fair Market Value on the Date of Grant of the Right if it is not a Related Right or (B) the Option Price of the Related Option if the Right is a Related Right; and (c) a Right that is a Related Right to an Incentive Stock Option or Nonqualified Stock Option may be exercised only when and to the extent the Related Option is exercisable. 7.4 The exercise, in whole or in part, of a Related Right shall cause a reduction in the number of Shares subject to the Related Option equal to the number of Shares with respect to which the Related Right is exercised. Similarly, the exercise, in whole or in part, of a Related Option shall cause a reduction in the number of Shares subject to the Related Right equal to the number of Shares with respect to which the Related Option is exercised. 8. Exercise of Options and Rights; Call or Put of Awards 8.1 An Option or Right may, subject to the terms of the applicable Agreement under which it was granted, be exercised in whole or in part by the delivery to the Corporation of written notice of the exercise, in such form as the Committee may prescribe, accompanied, in the case of an Option, by full payment for the shares with respect to which the Option is exercised. To the extent provided in the applicable Option Agreement, payment may be made, in whole or in part, in Mature Shares (other than Restricted Stock) valued at Fair Market Value on the Date of Exercise or by delivery of a promissory note as provided in Section 8.2 hereof. 8.2 To the extent provided in an Option Agreement and permitted by applicable law, the Committee may accept as partial payment of the Option Price a promissory note executed by the Optionee evidencing his or her obligation to make future cash payment thereof. Promissory notes made pursuant to this Section 8.2 shall be fully recourse, shall have a fixed maturity date no later than four years from the date the promissory note is made, shall bear interest on the unpaid portion thereof at ten percent (10%), shall be secured by a pledge of the Shares received upon exercise of the Option, and shall contain such other terms as may be determined by the Committee. 8.3 An Option or right may be exercised during the Optionee's lifetime only by Optionee or, in the event of his or her legal disability, by his or her legal representative. After the death of an Optionee, an Option or Right may be exercised only by the Optionee's legal representative. 8.4 (a) In the event of a Change of Control, the Corporation may, pursuant to the Agreement, have the right, but not the obligation, by written notice to the applicable Optionees and Grantees, to call some or all of the Options, Rights, Restricted Stock and Incentive Shares granted hereunder (respectively, the "Called Options," "Called Rights," "Called Restricted Stock" and "Called Incentive Shares"). In the event of a Change of Control, the employee may, pursuant to the Agreement, have the right, but not the obligation, by written notice to the Corporation, to put some or all of the Options, Rights, Restricted Stock and Incentive Shares granted to him or her hereunder (respectively, the "Put Options," "Put Rights," "Put Restricted Stock" and "Put Incentive Shares"). (b) The Called or Put Restricted Stock and/or Called or Put Incentive Shares shall be purchased by the Corporation for the purchase price and on the same terms and conditions as the other shares of the Corporation being purchased in connection with the Change of Control. Such purchase shall occur on the same date as the Change of Control (the "Closing Date"). (c) On the Closing Date, any Called or Put Options shall be deemed to have been exercised and the purchase price therefor shall be deemed to have been paid in Shares of Common Stock issuable thereunder (and any Rights that are Related Rights of Called or Put Options shall be deemed exercised). On the Closing Date, the remaining number of Shares which the Optionee is entitled to receive pursuant to any Called or Put Options shall be purchased by the Corporation for the purchase price and on the same terms and conditions as the other shares of the Corporation being purchased in connection with the Change of Control. (d) On the Closing Date, any Called or Put Rights that are not Related Rights shall be deemed exercised and any amounts due by the Corporation to the Optionee thereunder shall be paid to the Optionee on the same terms and conditions as the other shares of the Corporation being purchased in connection with the Change of Control. 8.5 In determining the effect of a termination on the rights and benefits of an Award, the Committee may make distinctions based upon the cause of termination. Unless the Committee otherwise determines the effect a termination of employment on the rights and benefits under an Award, and in the case of Incentive Stock Options, subject to the applicable Code limits: (a) upon an Optionee's death, an Award shall become and shall remain fully exercisable for one year after the date of death or until the expiration of the stated term of the Award, whichever occurs first; (b) upon the termination by the Corporation of the Optionee's employment for cause (other than a termination for cause within two (2) years following a Change in Control), as determined by the Committee in its sole discretion, the Award shall terminate; and (c) upon a termination of a Optionee's employment or services for any reason other than the reasons set forth in clauses (a) and (b), any portion of an Award that is not yet exercisable shall terminate and any portion of such Award that is then exercisable shall remain fully exercisable for three (3) months after the date of termination or until the expiration of the stated term of the Award, whichever occurs first. 9. Restricted Stock Awards 9.1 Restricted Stock awards under the Plan shall consist of Shares that are restricted against transfer, subject to forfeiture, and subject to such other terms and conditions intended to further the purposes of the Plan as may be determined by the Committee. Such terms and conditions may provide, in the discretion of the Committee, for the vesting of such awards to be contingent upon the achievement of one or more specified Performance Goals or upon a Change in Control. 9.2 Restricted Stock awards under the Plan shall be evidenced by Agreements specifying the terms and conditions of the Award. Each Agreement evidencing an award of Restricted Stock shall contain the following: (a) prohibitions against the sale, assignment, transfer, exchange, pledge, hypothecation, or other encumbrance of (A) the Shares awarded as Restricted Stock under the Plan, (B) the right to vote the Shares, to the extent such Shares have voting rights, and (C) the right to receive dividends thereon, in each case during the restriction period applicable to the Shares: provided. however, that the Grantee shall have all the other rights of a stockholder including, but not limited to, the right to receive dividends and the right to vote the Shares, to the extent such Shares have voting rights; (b) a requirement that each certificate representing Shares of Restricted Stock shall be deposited with the Corporation, or its designee, and shall bear the following legend: This certificate and the shares of stock represented hereby are subject to the terms and conditions (including the risks of forfeiture and restrictions against transfer) contained in the IT Partners, Inc., Amended 1997 Long-Term Incentive Plan, and an Agreement entered into between the registered owner and IT Partners, Inc. Release from such terms and conditions shall be made only in accordance with the provisions of the Plan and the Agreement, a copy of each of which his on file in the office of the Secretary of IT Partners, Inc. (c) the terms and conditions upon which any restrictions applicable to Shares of Restricted Stock shall lapse and new certificates free of the foregoing legend, but subject to any restrictions contained in the Restricted Stock and Nonqualified Stock Option Agreement, shall be issued to the Grantee or his or her legal representative; and (d) such other terms, conditions and restrictions as the Committee in its discretion may specify including, without limitation, terms that condition the lapse of forfeiture and transfer restrictions upon the achievement of Performance Goals. 10. Incentive Share Awards Incentive Shares awarded under the Plan shall be evidenced by an Agreement specifying the terms and conditions of such Award. Incentive Share awards shall provide for the issuance of Shares to a Grantee at such times and subject to such terms and conditions as the Committee shall deem appropriate including, but not limited to, terms that condition the issuance of Shares upon the achievement of Performance Goals. 11. Nontransferability Awards made under this Plan shall not be transferable other than (i) by will or the laws of descent and distribution, or (ii) pursuant to a qualified domestic relations order as defined in Section 414(p) of the Code. A Related Right is transferable only when the Related Option is transferable and only with the Related Option and under the same conditions that apply to the Related Option. 12. Capital Adjustments In the event of any change in the outstanding Common Stock by reason of any stock dividend, split-up, recapitalization, reclassification, combination or exchange of shares, merger (where the Corporation is not the surviving entity), consolidation or liquidation and the like, the Committee shall provide for a substitution for or adjustment, as appropriate, in (i) the number and class of Shares subject to outstanding Options, Rights, Restricted Stock and Incentive Share awards (ii) the Option Price of Options and the base price upon which payments under Rights that are not Related Rights are determined, and (iii) the aggregate number and class of Shares for which Awards thereafter may be made under the Plan and to individual Award recipients. 13. Amendment and Termination of Agreement The Board may amend, alter or terminate the Plan in any respect at any time; provided, however, that, after the Plan has been approved by the stockholders of the Corporation, no amendment, alteration or termination of the Plan shall be made by the Board without approval of (i) the Corporation's stockholders to the extent stockholder approval of the amendment is required by the applicable law, and (ii) each affected Optionee or Grantee if such amendment, alteration or termination would adversely affect his or her rights or obligations under any Award made prior to the date of such amendment, alteration or termination. 14. Modification, Extension and Renewal of Options, Rights, Restricted Stock and Incentive Shares, Substituted Options and Rights 14.1 Subject to the terms and conditions of the Plan, the Committee may modify, extend or renew outstanding Options and Rights, or accept the surrender of outstanding Options and Rights (to the extent not theretofore exercised) granted under the Plan or under any other plan of the Corporation or an Subsidiary, and authorize the granting of new Options and Rights pursuant to the Plan in substitution therefor (to the extent not theretofore exercised), and the substituted Options or Rights may specify a lower exercise price than the surrendered Options and Rights, a longer term than the surrendered Options and Rights, or have any other provisions that are authorized by the Plan. Subject to the terms and conditions of the Plan, the Committee may modify the terms of any outstanding awards of Restricted Stock or Incentive Shares. Notwithstanding the foregoing, however, no modification of an Award shall, without the consent of the Optionee or Grantee, alter or impair any of the Optionee's or Grantee's rights or obligations under such Award. 14.2 Anything contained herein to the contrary notwithstanding, Options and Rights may, at the discretion of the Committee, be granted under the Plan in substitution for stock appreciation rights and options to purchase shares of capital stock of another corporation which is merged into, consolidated with, or all or a substantial portion of the property or stock of which is acquired by, the Corporation or one of its Subsidiaries. The terms and conditions of the substitute options and rights so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee may deem appropriate in order to confirm, in whole or part, to the provisions of the options and stock appreciation rights in substitution for which they are granted. Such options and rights shall be counted toward the Share limits imposed by Section 5.1, except to the extent it is determined by the Committee that the applicability of such sentence is required in order for grants of Options and Rights hereunder to be eligible to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code. 15. Effectiveness of the Plan The Plan and any amendments requiring stockholder approval pursuant to Article 13 are subject to approval by vote of the stockholders of the Corporation within 12 months after their adoption by the Board. Subject to that approval, the Plan and any amendments are effective on the date on which they are adopted by the Board. Options, Rights, Restricted Stock and Incentive Shares may be granted or awarded prior to stockholder approval of the Plan or amendments, but each such Award shall be subject to the approval of the Plan or amendments by the stockholders. The date on which any Option, Right, Restricted Stock or Incentive Shares granted or awarded prior to stockholder approval of the Plan or amendment is granted or awarded shall be the Date of Grant for all purposes as if the Option, Right, Restricted Stock or Incentive Shares had not been subject to approval. No Option or Right may be exercised prior to such stockholder approval, and any Restricted Stock or Incentive Shares awarded shall be forfeited if such stockholder approval is not obtained. 16. Withholding The Corporation's obligation to deliver Shares or pay any amount pursuant to the terms of any Award hereunder shall be subject to the satisfaction of applicable federal, state and local tax withholding requirements. To the extent provided in the applicable Agreement and in accordance with rules prescribed by the Committee, an Optionee or Grantee may satisfy any such withholding tax obligation by any of the following means or by a combination of such means: (i) tendering a cash payment, (ii) authorizing the corporation to withhold Shares otherwise issuable to the Optionee or Grantee, or (iii) delivering to the Corporation Mature Shares. 17. Term of the Plan Unless sooner terminated by the Board pursuant to Article 13, the Plan shall terminate on ________, 2008, and no Options, Rights, Restricted Stock or Incentive Shares may be granted or awarded after such date. The termination of the Plan shall not affect the validity of any Award outstanding on the date of termination. 18. Indemnification of Committee In addition to such other rights of indemnification as they may have as Directors or as members of the Committee, the members of the Committee shall be indemnified by the Corporation against the reasonable expenses, including attorneys' fees, actually and reasonably incurred in connection with the defense of any action, suit or proceeding or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Option, Right, Restricted Stock or Incentive Shares granted or awarded hereunder, and against all amounts reasonably paid by them in settlement thereof or paid by them in satisfaction of a judgment in any such action, suit or proceeding, if such members acted in good faith and in a manner which they believed to be in, and not opposed to, the best interests of the Corporation. 19. General Provisions 19.1 The establishment of the Plan shall not confer upon any Employee, Director or Consultant any legal or equitable right against the Corporation, any Subsidiary or the Committee, except as expressly provided in the Plan. 19.2 The Plan does not constitute an inducement or consideration for the employment or services of any Employee, Director or Consultant, nor is it a contract between the Corporation or any Subsidiary and any Employee, Director or Consultant. Participation in the Plan shall not give an Employee any right to be retained in the service of the Corporation or any Subsidiary. 19.3 Neither the adoption of this Plan nor its submission to the stockholders, shall be taken to impose any limitations on the powers of the Corporation or its subsidiaries to issue, grant, or assume options, warrants, rights or restricted stock, other than under this Plan, or to adopt other stock option or restricted stock plans or to impose any requirement of stockholder approval upon the same. 19.4 The interests of any Employee, Director or Consultant under the Plan are not subject to the claims of creditors and may not, in any way, be assigned, alienated or encumbered except as provided in Article 11. 19.5 The Plan shall be governed, construed and administered in accordance with the laws of the State of Maryland and the intention of the Corporation that Incentive Stock Options granted under the Plan qualify as such under Section 422 of the Code. 19.6 The Committee may require each person acquiring Shares pursuant to Awards hereunder to represent to and agree with the Corporation in writing that such person is acquiring the Shares without a view to distribution thereof. The certificates for such Shares may include any legend which the Committee deems appropriate to reflect any restrictions on transfer. All certificates for Shares issued pursuant to the Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities laws. The Committee may place a legend or legends on any such certificates to make appropriate reference to such restrictions. 19.7 The Corporation shall not be required to issue any certificate or certificates for Shares with respect to Awards under this Plan, or record any person as a holder of record of such Shares, without obtaining, to the complete satisfaction of the Committee, the approval of all regulatory bodies deemed necessary by the Committee, and without complying to the Committee's complete satisfaction, with all rules and regulations, under federal, state or local law deemed applicable by the Committee. OPTION NO.: EMPLOYEE: DATE OF GRANT: OPTION PRICE: COVERED SHARES: IT PARTNERS, INC. AMENDED 1997 LONG-TERM INCENTIVE PLAN * * * * NONQUALIFIED STOCK OPTION AGREEMENT 1. Definitions. In this Agreement, except where the context otherwise indicates, the following definitions apply: (a) "Agreement" means this Nonqualified Stock Option Agreement. (b) "Board" means the Board of Directors of the Company. (c) A "Change of Control" means either: (i) the acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of fifty percent (50%) or more of the then outstanding shares of common stock of the Company or a Subsidiary of the Company, but excluding for this purpose any such acquisition by (A) the Company, a Subsidiary of the Company, or any other entity a majority of which is owned, directly or indirectly, by the beneficial owners of a majority of the outstanding shares of voting Common Stock of the Company, or (B) any corporation with respect to which, following such acquisition, more than fifty percent (50%) of the then outstanding shares of voting common stock of such corporation is then beneficially owned, directly or indirectly, by the Company, a Subsidiary of the Company, or the individuals and entities who were the beneficial owners, directly or indirectly, of the voting common stock of the Company immediately prior to such acquisition; or (ii) approval by the holders of the stock of the Company of a reorganization, merger or consolidation, in each case, with respect to which the Company, any subsidiary of the Company, or any other entity a majority of which is owned, directly or indirectly, by the beneficial owners of a majority of the outstanding shares of voting common stock of the Company, do not, alone or in combination, following such reorganization, merger or consolidation, beneficially own, directly or indirectly, more than fifty percent (50%) or more of the then outstanding shares of voting common stock of the corporation resulting from such reorganization, merger or consolidation. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means the committee charged, pursuant to the provisions of the Plan, with the administration of the Plan. Unless otherwise determined by the Board, the Compensation Committee of the Board shall be the Committee. (f) "Common Stock" means the common stock, $.01 per share, of the Company. (g) "Company" means IT Partners, Inc. (h) "Covered Shares" means the Shares subject to the Option set forth as the "Covered Shares" on Page 1 of this Agreement. (i) "Date of Exercise" means the date on which the Company receives notice pursuant to Paragraph 5(a) of the exercise, in whole or in part, of the Option. (j) "Date of Expiration" means the date on which the Option shall expire, which shall be ten years after the Date of Grant. (k) "Date of Grant" means the date set forth as the "Date of Grant" on page 1 of this Agreement. (l) "Employee" means the person identified as Employee on page 1 of this Agreement. (m) "Fair Market Value " means the amount equal to the sales price for a Share, on the date such fair market value is to be determined, as determined by the Board of Directors in good faith. (n) "Mature Shares" means Shares held by the Employee free and clear of any liens or encumbrances for at least six months. (o) "Option" means the Nonqualified stock option granted to the employee in Paragraph 2 of this Agreement. (p) "Option Price" means the price per Share at which an Option may be exercised. The Option Price shall be determined by the Committee and shall not be less than the Fair Market Value determined as of the Date of Grant. Notwithstanding the foregoing, in the case of an Incentive Stock Option granted to an Employee who (applying the rules of Section 424(d) of the Code) owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the corporation or a Subsidiary (a "Ten-Percent Stockholder"), the Option Price shall not be less than one hundred and ten percent (110%) of the Fair Market Value on the Date of Grant. (q) "Option Price" means the dollar amount per Share set forth as the "Option Price" on page 1 of this Agreement. (r) "Employee" means the person identified as the "Employee" on page 1 of this Agreement. (s) "Plan" means the IT Partners, Inc., Amended 1997 Long-Term Incentive Plan. (t) "Share" means a share of Common Stock. (u) "Subsidiary" means a corporation at least fifty percent of the total combined voting owner of all classes of stock of which is owned by the Company, either directly or through one or more other Subsidiaries. 2. Nonqualified Options. (a) Grant of Option. Pursuant to the Plan and subject to the terms of this Agreement, the Company hereby grants to the Employee or his successors Options (the "Options") to purchase from the Company that number of Shares equal to the Covered Shares, exercisable at the Option Price. (b) Terms of the Option. (i) Type of Option. The Options are intended to be Nonqualified stock options, and not incentive stock options within the meaning of Section 422 of the Code. (ii) Option Periods. During the period commencing on the Date of Grant and terminating on the Date of Expiration, the Options may be exercised with respect to all or a portion of the Covered Shares (in full shares), to the extent that the Options have not been previously exercised with respect to such Covered Shares, subject to the following limitations: (A) No Options may be exercised until the second anniversary of the Date of Grant, (B) On and after the second anniversary of the Date of Grant, Options may be exercised to a maximum of forty percent (40%) of the Covered Shares; (C) On and after the third anniversary of the Date of Grant, Options may be exercised to a cumulative maximum of sixty percent (60%) of the Covered Shares; (D) On and after the fourth anniversary of the Date of Grant, Options may be exercised to a cumulative maximum of eighty percent (80%) of the Covered Shares; and (E) Thereafter, all Options may be exercised in full. (iii) Notwithstanding the above provisions of this Paragraph 2(b), the Options may be exercised in full upon a Change of Control. (iv) Exercise During Employee's Lifetime, After Death. The Option may be exercised during the Employee's lifetime only by the Employee or, in the event of his or her legal disability, by his or her legal representative. After the Employee's death, the Options may be exercised only by the Employee's legal representative. (v) Termination of Employment or Service. If Employee's employment with the Company is terminated, any Options (or portion thereof) not exercisable on or before that date shall be forfeited. To the extent that any Options remain exercisable, during the period commencing on termination of employment or service and terminating on the date which is thirty (30) days after the date of termination of employment or service, such Options may be exercised with respect to the number of the Covered Shares (in full shares), to the extent that the Options have not been previously exercised with respect to such Covered Shares; provided, however, in the event of termination of employment or service by reason of death or disability, the thirty (30)-day period provided for in this sentence shall be ninety (90) days. After such thirty day period (or, if applicable, ninety day period), the Options shall be forfeited. (vi) Nontransferability. The Options are not transferable by the employee other than (i) by will or the laws of descent and distribution, or (h) pursuant to a qualified domestic relations order as defined in Section 414(p) of the Code. Any permitted transferee shall be subject to all of the terms and conditions of this Agreement applicable to the Employee. (vii) Payment of the Option Price. The Employee, upon exercise, in whole or in part, of an Option, may pay the Option Price in cash, or by delivering duly endorsed certificates representing Mature Shares having a Fair Market Value on the Date of Exercise aggregating not more than the portion of the Option Price being paid by delivery of such Mature Shares, or in a combination of cash and Mature Shares, or as provided in Paragraph 2(i) hereof. (c) Capital Adjustments. The number of Covered Shares and Option Price shall be subject to such adjustment, if any, as appropriate to reflect such events as stock dividends, stock splits, adoption of stock rights plans, recapitalizations, mergers, consolidations or reorganizations of or by the Company. (d) Exercise. (i) Notice. The Options shall be exercised, in whole or in part, by the delivery to the Company of written notice of such exercise, in such form as the Committee may from time to time prescribe, accompanied by (i) full payment of the Option Price with respect to that portion of the Option being exercised and (ii) any amounts required to be withheld pursuant to applicable income tax laws in connection with such exercise. Until the Committee notifies the Employee to the contrary, the form attached to this Agreement as Exhibit A shall be used to exercise the Option. Payment of all amounts required to be withheld may be made, at the option of the Employees, in cash, Options, or Mature Shares. (ii) Effect. The exercise, in whole or in part, of an Option shall cause a reduction in the number of Covered Shares equal to the number of Shares with respect to which the Option is exercised. (e) Restriction on Exercise and Upon Shares of Common Stock Issued Upon Exercise. Notwithstanding any other provision of this Agreement, the Employee agrees, for himself and his successors, that the Options may not be exercised at any time that the Company does not have in effect a registration statement under the Securities Act of 1933, as amended, relating to the offer of Common Stock to the Employee under the Plan, unless the Company shall determine, on the basis of representations of the Employee, or the Company receives an opinion of counsel satisfactory to the Company that the exercise of the Option would not violate the registration provisions of the Securities Act of 1933, as amended. (f) Rights as Stockholder. The Employee shall have no rights as a stockholder with respect to any Shares subject to the Options until and unless a certificate or certificates representing such shares are issued to the Employee pursuant to this Agreement. Except as agreed, no adjustment shall be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates. (g) Employment and Service. Neither the granting of an Option evidenced by this Agreement nor any term or provision of this Agreement shall constitute or be evidence of any understanding, express or implied, on the part of the Company or any of its Subsidiaries to employ or retain the services of the Employee, as the case may be, for any period. Whatever reference is made in this Agreement to the employment or service of the Employee, it means employment or service, as the case may be (including service as a Director or Consultant) by the Company or a Subsidiary thereof, including ________________________ (the "Subsidiary"). (h) Subject to the Plan. The Options evidenced by this Agreement and the exercise thereof are subject to the terms and conditions of the Plan, which are incorporated herein by reference and made a part hereof, but the terms of the Plan shall not be considered an enlargement of any benefits under this Agreement. In addition, the Option is subject to any miles and regulations promulgated by the Committee. (i) Surrender of Option in Exchange for Shares. The Committee shall permit the Employee to surrender the Option evidenced by this Agreement (or a portion thereof) and to receive upon such surrender that number of Shares having an aggregate Fair Market Value as of the date of surrender equal to the product of (a) the excess of Fair Market Value as of such surrender date over the Option Price with respect to such surrendered Option (or portion thereof), multiplied by (b) the number of Shares covered by the Option (or portion thereof) surrendered. No fractional Shares shall be issued upon such surrender. Cash shall be paid in lieu of any such fractional Share in amount equal to the product of such fraction multiplied by the Fair Market Value on the date of surrender. Any such surrender shall be treated as an exercise of such Option (or portion thereof) for purposes of this Agreement. No such surrender may be made before the Option (or the portion thereof surrendered) is exercisable. 3. Protection of Confidential Information, Non-Competition. (a) The Employee acknowledges that: (i) The established nature of the business of The Subsidiary was material to the decision of the Company to acquire and conduct the business of The Subsidiary; (ii) As a result of his employment by The Subsidiary, the Employee has obtained and will obtain certain proprietary, secret and confidential information concerning the business of The Subsidiary and the Company, including, without limitation, financial and organizational information, the identity of customers and sources of supply, their needs and requirements, the nature and extent of contracts with them, and related cost, price and sales information; (iii) The Subsidiary and the Company will suffer immediate, irreparable and substantial damage which will be difficult to compute if, during the period of his employment with The Subsidiary or thereafter, the Employee should enter a competitive business with any material segment of The Subsidiary's or the Company's business (whether as an employee, shareholder, member, officer or otherwise) or should divulge secret and confidential information relating to the business of the Company heretofore or hereafter acquired by him in the course of his employment by The Subsidiary; and (iv) The provisions of this Section 3 are reasonable and necessary for the protection of the business of The Subsidiary and the Company. (b) The Employee agrees that he will not at any time, either during his employment with The Subsidiary or thereafter, divulge to any person, firm or corporation any confidential information obtained or learned by him during the course of his employment with The Subsidiary, or prior to the commencement thereof in the course of his employment by The Subsidiary and the operation of the business, with regard to the operational, financial, organizational, business or other affairs of The Subsidiary, the Company or any Subsidiary, or their business, their officers and directors, including, without limitation, trade "know how," secrets, customer lists, sources of supply, pricing policies, operational methods or technical processes, except: (i) in the course of faithfully performing his duties hereunder, (ii) with The Subsidiary's or the Company's express written consent, (iii) to the extent that any such information is in the public domain other than as a result of the Employee's breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other governmental process. In the event that the Employee shall be required to make disclosure pursuant to the provisions of clause (iv) of the preceding sentence, the Employee promptly but in no event more than forty-eight (48) hours after leaning of such subpoena, court order, or other governmental process, shall notify, by personal delivery or by facsimile, confirmed by mail or by certified mail, return receipt requested, the Company and, at the Company's expense, the Employee shall: (A) take all reasonably necessary steps requested by The Subsidiary or the Company to defend against the enforcement of such subpoena, court order or other governmental process, and (B) permit The Subsidiary or the Company to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof. (c) Upon termination of his employment with The Subsidiary, or at any time The Subsidiary's or the Company's Board of Directors may reasonably request, the Employee will promptly deliver to The Subsidiary and/or the Company all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof) relating to the business of The Subsidiary or the Company and all property associated therewith, which he may then possess or have under his control. (d) During the term of his employment with The Subsidiary and for a period of one (1) fiscal year thereafter, the Employee shall not, without the express prior written permission of the Company, within 250 miles of The Subsidiary's or the Company's principal place of business, directly or indirectly: (i) enter into the employ of or render any significant and material services to any person, firm or corporation engaged in any Competitive Business (as defined in Subsection (j) of Section 3 hereof), except if named as a fiduciary in a Last Will and Testament; (ii) engage in any Competitive Business for his own account; (iii) become associated with or interested in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor or in any other relationship or capacity; (iv) employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed or retained by The Subsidiary or the Company or its Subsidiaries while the Employee was employed by The Subsidiary; (v) employ or retain, or have or cause any other person or entity to employ or retain, any person who remains employed or retained by The Subsidiary or the Company or its Subsidiaries, or (vi) solicit, interfere with, or endeavor to entice away from the Subsidiary or the Company or its Subsidiaries any of its or their customers or sources of supply. Nothing in this Agreement, however, shall preclude the Employee from investing his personal assets in the securities of any corporation or other business entity which is engaged in a Competitive Business if such securities are traded on a national stock exchange or in over-the-counter market and if such investment does not result in his actually and/or beneficially owning, at any time, more than five percent (5%) of the publicly traded equity securities of such competitor. (e) If the Employee commits a breach or threatens to commit a breach, of any of the provisions of Sections 3(d)(i) through 3(d)(iii), The Subsidiary's and/or the Company's sole right and remedy shall be the automatic cancellation of all of the Employee's unexercised Options, whether or not such Options are exercisable hereunder. If the Employee commits a breach, or threatens to commit a breach, of any of the provisions of Sections 3(b) through 3(c) and/or Sections 3(d)(iv) through 3(d)(vi), The Subsidiary and/or the Company shall have the right and remedy: (i) to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Employee that the services being rendered to The Subsidiary are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to The Subsidiary and the Company and that money damages alone will not provide an adequate remedy to The Subsidiary and the Company; and (ii) to require the Employee to account for and pay over to The Subsidiary and/or the Company all compensation, profits, monies, accruals, increments or other benefits (collectively "Benefits") derived or received by the Employee as the result of any transactions constituting a breach of any of the provisions of Sections 3(b) through 3(c) and/or Sections 3(d)(iv) through 3(d)(vi), and the Employee hereby agrees to account for and pay over such Benefits to the Company. Each of the rights and remedies enumerated in this Section 3(e) shall be independent of the other, and shall be severally enforceable, and such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to The Subsidiary and/or the Company under law or equity. (f) If the Employee shall violate any covenant contained in Section 3(d), the duration of such covenant so violated shall be automatically extended for a period of two (2) years from the date on which the Employee permanently ceases such violation or for a period of two (2) years from the date of the entry by a court of competent jurisdiction of a final order or judgment enforcing such covenant, whichever period is later. (g) If any provision of Sections 3(b) or 3(d) is held to be unenforceable because of the scope, duration or area of its applicability, the tribunal making such determination shall have the power to modify such scope, duration, or area, or all of them to the minimum extent necessary so that these provisions would be enforceable, and such provision or provisions shall then be applicable in such modified form. (h) The Employee acknowledges that he may be directly and materially involved in many important policy and operational decisions of The Subsidiary. The Employee further acknowledges that the scope of the foregoing restrictions has been specifically bargained between The Subsidiary, the Company and the Employee, each being fully informed of all relevant facts. Accordingly, the Employee acknowledges that the foregoing restrictions of this Section 3 are fair and reasonable, are minimally necessary to protect The Subsidiary, the Company and its Subsidiaries, their stockholders and the public from the unfair competition of the Employee who, as a result of his employment with The Subsidiary, will have had unlimited access to the most confidential and important information of The Subsidiary and the Company and its Subsidiaries, their business and future plans. The Employee furthermore acknowledges that no unreasonable harm or injury will be suffered by him from enforcement of the covenants contained herein and that he will be able to earn a reasonable livelihood following termination of his employment notwithstanding enforcement of the covenants contained herein. (i) The Subsidiary, the Company and the Employee do hereby further acknowledge and agree that none of the time span, scope or area covered by the restrictive covenants above is or are unreasonable, and that it is the specific intent of The Subsidiary, the Company and the Employee that each and all of the provisions set forth in this section shall be valid and enforceable as specifically set forth hereinabove to the fullest extent possible. If it shall be judicially determined that any of the provisions set forth in this section shall not be valid or enforceable as specifically set forth hereinabove, such provision shall not be declared invalid but rather shall be modified in such manner so as to result in the same being valid and enforceable to the maximum extent permitted by law. It is further agreed and understood that, because of the highly confidential and sensitive nature of The Subsidiary's and the Company's business, in the event of any violation by the Employee of any of the preceding provisions of this section, The Subsidiary and/or the Company may, in addition to any other remedies which it may have, obtain injunctive relief in any court of appropriate jurisdiction to enforce the terms hereof. (j) As used in this Agreement, the term "Competitive Business" shall mean either: (i) any of the development, production, marketing or distribution of products and services of the information technology industry; or (ii) any other product or service (including software- related products or services) of every nature, kind and description whatsoever which was under active development, production, marketing or distribution by the Company at the time of the termination of the Employee's employment, as documented by existing Company records at the time of such termination. IN WITNESS WHEREOF, the Company and The Subsidiary have caused this Agreement to be signed on its behalf effective as of the Date of Grant. ATTEST: IT PARTNERS, INC. By: --------------------------------- Daniel J. Klein, President ATTEST: [SUBSIDIARY] By: ---------------------------------- , President --------------- Accepted and agreed to as of the Date of Grant. - ------------------------------------- Employee "EXHIBIT A" EXERCISE OF OPTION Board of Directors IT Partners, Inc. Gentlemen: The undersigned, the employee under the Nonqualified Stock Option Agreement identified as Option No. , granted pursuant to the ------------------- IT Partners, Inc. Amended 1997 Long- Term Incentive Plan (the "Option"), hereby irrevocably elects to exercise the Option granted in the Agreement to purchase shares of Common Stock of IT Partners, Inc. par value $.01 per share and herewith makes payment of $ in the form of: [CHOOSE ONE] ----------------- (a) $ in cash; or (b) Mature Shares* (c) $ in Options; or (d) $ in cash and Mature Shares*. The undersigned, the Employee under the Nonqualified Stock Option Agreement identified as Option No. , granted pursuant to the ---------------- IT Partners, Inc. Amended 1997 Long- Term Incentive Plan (the "Option"), hereby elects to satisfy its withholding requirements regarding the foregoing exercise of the Option in the form of: [CHOOSE ONE] (a) $ in cash; or (b) Mature Shares* Dated: ------------------- ------------------------------------ (Signature of Employee) Date Received by: ------------------------ Received by: ----------------------------- * "Mature Shares" means shares of IT Partners, Inc. held by the Employee free and clear of any liens or encumbrances for at least six months. Mature Shares being delivered in payment of all or any part of the exercise price or being used to satisfy withholding requirements must be represented by certificates registered in the name of the Employee and duly endorsed by the Employee and by each and every other co-owner in whose name the shares may also be registered. EX-10.11 20 SENIOR EXECUTIVE EMPLOYMENT AGREEMENT THIS SENIOR EXECUTIVE EMPLOYMENT AGREEMENT (the "Agreement"), dated as of June 30, 1997 between Christopher R. Corbett (the "Executive")residing at 12619 Oxon Road, Herndon, Virginia 20171 (the "Executive") and IT PARTNERS, INC., a Delaware corporation, having its principal office at 1006 Highland Drive, Silver Spring, Maryland 20910 (the "Company"). RECITALS: A. The Company has acquired, by indirect merger, one hundred percent (100%) of the outstanding common stock of A-COM, Inc. ("A-COM"); B. The Company is utilizing such acquired assets to conduct a business which is engaged in the design, manufacture and sale of products and services to the information technology industry and such Business will continue hereafter, during the term of this Agreement, to be operated and conducted by the Company; and C. The Company desires to assure itself of the Executive's services with respect to the company's operation of the Business NOW, THEREFORE, in exchange for good and valuable consideration, both the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment, Duties and Acceptance. 1.1 The Company hereby employs the Executive during the Term (as hereinafter defined) of this Agreement as President of the A-COM, Inc. Division and National Practice Leader for the Company's Electronic Systems Integrator Companies ("ESIC"). The Executive shall report directly to the President and be subject to the reasonable direction, policies, plans, oversight and review of the President of the Company. 1.2 The Company may assign to the Executive such other executive and administrative duties for the Company as may be determined by the President consistent with the Executive's expertise, experience and prior duties with A- COM, Inc. 1.3 The Executive accepts such employment and agrees to devote his full and exclusive business time, energies, attention and best efforts to the performance of his duties hereunder, which may include such travel as may reasonably be required of him, it being understood that throughout the term of this Agreement the Executive shall be posted in, and be based out of, the Northern Virginia area. 1.4 The Executive shall not, without the prior written consent of the Company, during the Term of this Agreement be engaged in any other business activity involving a Competitive Business, whether or not pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing the Executive from making and supervising personal investments, provided they: (a) will not require any substantial services on his part in the operation of the affairs of the companies in which such investments are made, provided, further, however, that this shall not be construed so as to prevent the Executive from continuing the ownership interest in Electronic Systems Distributors, Inc. ("ESD"), which ownership interest has been previously disclosed to the Buyer, or from serving on the Board of the Directors of ESD, or otherwise engaging in the business of ESD, provided, further, however, that such ownership interest and board service shall not be construed to be a breach of this Agreement or to represent a conflict interest under this Agreement; (b) will not cause a breach of Section 4.4, below; and (c) will not unduly interfere with the performance of the Executive's duties hereunder. 1.5 All of the Executive's work product and work in process resulting from this Agreement shall be considered "work made for hire" under the U.S. Copyright Act, 17 USC Section 101 et. seq and all intellectual property rights therein shall be the sole and exclusive property of the Company. In addition, in the event that any work product or work in process is not considered to be a work made for hire, the Executive hereby agrees, at the Company's expense, to assign all proprietary rights in such work product or work in process to the Company. 2. Compensation; Benefits. 2.1 As partial compensation during the Term of this Agreement for all of the Executive's services to be rendered hereunder, Company agrees to pay, or cause to be paid, to the Executive, in the manner hereinafter provided, an amount comprised of base compensation equal to $190,000 per annum (the "Base Salary"), to be paid in weekly installments. less all such sums as may be required by law to be withheld or deducted. (a) As compensation for serving as the National Practice Leader for IT Partners' electronic systems integrator companies, the Executive will be paid, in addition to the amounts provided for in Section 2.1, the sum of $25,000 per year, the same to be paid in weekly installments, or in such manner as the Executive shall direct. (b) In addition to the consideration described in paragraph 2.1, the Executive will be paid a finders fee of five percent (5 %) of the first million dollars, four percent (4%) of the second million dollars, three percent (3%) of the third million dollars, two percent (2%) of the fourth million dollars, and one (1%) of the remaining dollars of the purchase price for any other electronic systems integration companies which he will be personally and primarily responsible for recruiting. The finders fee shall be paid in cash and/or stock of the Company, as directed by The Executive, at the settlement of the sale of the recruited company to the Company. To avoid misunderstandings and possible disagreements, the Executive will disclose recruiting targets and the Company will immediately advise Corbett of any prior contacts or recruitment plans that the Company had relative to the target companies All members of the National System Contractors Association are potential targets for which the Executive is personally and primarily responsible for recruiting. All out-of-pocket expenses, including travel, meals, overnight accommodations and entertainment, shall be borne by the Company, provided, however, that all of the provisions of this Section 2.1(b) shall terminate upon the closing of an initial public offering of the Buyer's common stock. 2.2 In addition to the base salary referred to in Section 2.1, the Executive shall, should an EBITDA of $1,694,048 or greater to be achieved by A-COM by March 31, 1998, be entitled to compensation in an amount equal to six (6) times the EBITDA in excess of $1,694,048, said sum not to exceed $1,500,000, and such sum to be paid to the Executive in the same proportions of cash, stock and debt as was the Purchase Price for A-COM, provided, however, that the value of the stock, if any, received by the Executive pursuant to this section shall be calculated as of March 31, 1998, and, provided, further, that the EBITDA for A-Com shall be based on the sole performance of A-COM, as A-COM existed as of the Closing, without regard to the performance of any related entity. Should A-COM acquire an additional company or companies so as to materially impact the EBITDA, the EBITDA shall be appropriately recalculated. Beginning June 30, 1998, the Executive shall receive an annual bonus as set forth in the Company's current Annual Incentive Compensation Plan. 2.2 (a) In case of any "event" and/or occurrence under Section 3.2, 3.3(b), 3.3(c) or 3.4(a), prior to March 31, 1998, the EBITDA and the amounts owed under this section shall be prorated based upon a 365-day year (using the EBITDA value existing on the last day of the month immediately preceding the date of death, disability and/or termination). 2.3 Severance Pay. In the event the Executive's employment hereunder is terminated by the Company at any time on or after the initial four (4) year Term pursuant to the express terms of Section 3.1 hereof, the Company shall pay to the Executive severance pay within thirty (30) days of said termination consisting of his Base Salary and Incentive Compensation equal to the amount paid for the fiscal years immediately preceding such termination and continue to provide him the benefits as set forth herein one year after such termination. 2.4 Business Expenses. The Executive will be reimbursed for automobile, travel, entertainment, lodging and other related reasonable business expenses actually incurred in connection with his work upon terms and conditions established by the Company from time to time and consistently applied for all of its senior executive officers. 2.5 Vacation: Sick Leave. The Executive shall be entitled to periods of vacation not less than three (3) weeks annually and sick leave during the Term of this Agreement upon terms and conditions established by the Company from time to time and consistently applied for all of its senior executive officers. 2.6 Other Benefits. The Executive shall receive hospitalization, major medical, disability and pension plan benefits upon terms and conditions established by the Company from time to time and consistently applied for all of its senior executive officers. 2.7 Insurance. The Company may, in the exercise of its sole and absolute discretion, obtain a policy or policies of insurance covering the life of the Executive. The Executive covenants that he will cooperate fully by performing all requirements of the insurer which are necessary to the issuance and maintenance of any such policies. The Company further agrees that it will pay all premiums of any such policy or policies. 3. Term and Termination. 3.1 The initial term of this Agreement shall be four (4) years, commencing as of June 30, 1997 and continuing through June 30, 2001 (the "Initial Expiration Date"), unless sooner terminated as herein provided. The term of this Agreement shall renew automatically for subsequent terms of one (1) year each (each a "Renewal Term"), unless at least sixty (60) days before the Initial Expiration Date, or at least sixty (60) days in advance of the expiration of any subsequent Renewal Term (as the case may be), either party gives the other party notice in writing of its intent not to renew this Agreement. As used in this Agreement, the term "Term" shall mean either the Initial Term or any Renewal Term, as the case may be. 3.2 If the Executive dies during the Term of this Agreement, the Term of this Agreement shall immediately terminate, except that the Company shall for a period of one hundred eighty (180) days following the date of his death pay to the legal representatives of the Executive's estate the Base Salary, as then in effect. The Company shall also pay up to and through the date of death the Incentive Compensation (prorated on a daily basis based on the prior year's Incentive Compensation, if any, or, if such termination occurs during the first full fiscal year, $50,000, pro rated on a daily basis). Such payment will be made within thirty (30) days of the date of death. 3.3 (a) The Company, by written notice to the Executive, may terminate the Term of this Agreement for proper cause upon ten (10) days notice. As used herein, "proper cause" shall exclusively mean that the Executive has: (i) refused or willfully failed to carry out specific directions of the Board, or willfully refused or willfully failed to perform a material part of his duties hereunder; (ii) committed a material breach of any of the provisions of Article 4 of this Agreement; (iii) acted in a fraudulent or dishonest manner in his relations with the Company that has served to adversely and materially harm the Company; (iv) committed larceny, embezzlement, conversion or any act involving the misappropriation of funds in the course of his employment; or (v) been convicted of any crime involving an act of moral turpitude. In the event of a termination under subparagraph (a) above, all Base Salary, Incentive Compensation and other benefits, the Term under this Agreement to be paid or provided to the Executive shall immediately cease, provided that, the Executive shall be entitled to receive all such compensation and benefits through the effective date of such termination. (b) In the event the Company terminates this Agreement by dismissing the Executive without proper cause, the Company shall pay the Executive his Base Salary and Incentive Compensation (equal to the amount paid for the full fiscal year immediately preceding such termination or, if such termination occurs during the first full fiscal year, $190,000 and continue to provide to him the benefits as set forth herein for the balance of the entire applicable Initial Term or Renewal Term, as the case may be. (c) In the event the Executive terminates the Term of this Agreement for "good reason", the Company shall pay the Executive his Base Salary and Incentive Compensation (equal to the amount paid for the full fiscal year immediately preceding such termination or, if such termination occurs during the first full fiscal year, $190,000 and provide to him the benefits as set forth herein for the balance of the entire applicable Initial Term or Renewal Term, as the case may be. For purposes of this section, the Executive shall have "good reason" to voluntarily terminate his employment if the Company shall have materially and substantially reduced the job description of such Executive or assigned to the Executive significant duties which are materially inconsistent with the Executive expertise, experience and prior duties with Information Technology Partners, Inc., as the case may be. 3.4 (a) The Company, by notice to the Executive, may upon thirty (30) days prior notice, terminate the Term of this Agreement if the Executive shall become disabled. Notwithstanding such termination, the Company shall for a period of one hundred eight days (180) days following the date of such termination both pay to the Executive all monies due hereunder up to the date of such notice, including Base Salary and Incentive Compensation (prorated on a daily basis based on the prior year's Incentive Compensation, if any) or if such termination occurs during the first full fiscal year pro rated on a daily basis based upon $190,000 and additionally provide the benefits as set forth herein. (b) For purposes of this Agreement, the term "disability" (i) shall mean the Executive's inability, for a period of one hundred eighty (180) consecutive days, to devote his full time to those duties as an employee of the Company which he was performing prior to his disability, and (ii) shall be deemed to have occurred on the one hundred eightieth first (181st) day of his inability to devote his full time to his duties as an employee of the Company. If by the one hundred eightieth (180th) consecutive day of absence the Executive can provide evidence, in the form of a doctor's certificate, of the likelihood of his return to work within the next one hundred eighty (180) days, "disability" shall be deemed to have occurred on the three hundred sixtieth first (361st) day of absence. The definition of "disability" may be altered by a vote of a simple majority of the board of Directors of Information Technology Partners, Inc. on a case by case basis, for example, to exclude disability which lasts for longer than one hundred eighty (180) consecutive days but is not permanent, or to include disability where each absence does not total one hundred eighty (180) consecutive days but involves absences frequent enough to be considered permanent. 4. Protection of Confidential Information; Non-Competition. 4.1 The Executive acknowledges that: (a) The established nature of the Business was material to the decision of the Company to acquire and conduct the Business and to employ the Executive hereunder. (b) As a result of his employment by the Company and his operation of the Business, the Executive has obtained and will obtain certain proprietary, secret and confidential information concerning the business of the Company, including, without limitation, financial and organizational information, the identity of customers and sources of supply, their needs and requirements, the nature and extent of contracts with them, and related cost, price and sales information. (c) The Company will suffer immediate, irreparable and substantial damage which will be difficult to compute if, during the period of his employment with the Company or thereafter, the Executive should enter a competitive business with any material segment of the Company's business (whether as an employee, shareholder, member, officer or otherwise) or should divulge secret and confidential information relating to the business of the Company heretofore or hereafter acquired by him in the course of his management of the Business and his employment by the Company. (d) The provisions of this Agreement are reasonable and necessary for the protection of the business of the Company. 4.2 The Executive agrees that he will not at any time, either during the Term of this Agreement or thereafter, divulge to any person, firm or corporation any confidential information obtained or learned by him during the course of his employment with the Company, or prior to the commencement thereof in the course of his employment by and management of the Business, with regard to the operational, financial, organizational, business or other affairs of the Business or the Company, their officers and directors, including, without limitation, trade "know how," secrets, customer lists, sources of supply, pricing policies, operational methods or technical processes, except: (i) in the course of faithfully performing his duties hereunder, (ii) with the Company's express written consent, (iii) to the extent that any such information is in the public domain other than as a result of the Executive's breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other governmental process. In the event that the Executive shall be required to make disclosure pursuant to the provisions of clause (iv) of the preceding sentence, the Executive promptly but in no event more than forty-eight (48) hours after learning of such subpoena, court order, or other governmental process, shall notify, by personal delivery or by facsimile, confirmed by mail or by certified mail, return receipt requested. the Company and, at the Company's expense, the Executive shall: (a) take all reasonably necessary steps requested by the Company to defend against the enforcement of such subpoena, court order or other governmental process, and (b) permit the Company to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof. 4.3 Upon termination of his employment with the Company, or at any time the Company's Board of Directors may reasonably request, the Executive will promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof) relating to the business of the Company and all property associated therewith, which he may then possess or have under his control. 4.4 During the term of his employment with the Company and for a period of one (1) fiscal year thereafter, except in the event of a termination without cause prior to the end of the Initial Expiration Date, the Executive shall not, without the express prior written permission of the Company, in the State of Maryland, the Commonwealth of Virginia, the Commonwealth of Pennsylvania and the District of Columbia, directly or indirectly: (i) enter into the employ of or render any significant and material services to any person, firm or corporation engaged in any Competitive Business (as defined in Section 6); (ii) engage in any Competitive Business for his own account; (iii) become associated with or interested in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor or in any other relationship or capacity; (iv) employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed or retained by Company while the Executive was employed by the Company; or (v) solicit, interfere with, or endeavor to entice away from the Company any of its or their customers or sources of supply. Nothing in this Agreement, however, shall preclude the Executive from investing his personal assets in the securities of any corporation or other business entity which is engaged in a Competitive Business if such securities are traded on a national stock exchange or in over-the-counter market and if such investment does not result in his actually and/or beneficially owning, at any time, more than five percent (5 %) of the publicly traded equity securities of such competitor. Notwithstanding any other provision of this Agreement, the event of a termination occurring prior to the end of the Initial Term either without cause or a voluntary termination for good reason, the Executive shall be free from the restrictions set forth in this Section 4.4. 4.5 If the Executive commits a breach, or threatens to commit a breach, of any of the provisions of Sections 4.2 through 4.4, the Company shall have the right and remedy: (a) to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to the Company and that money damages alone will not provide an adequate remedy to the Company; and (b) to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively "Benefits") derived or received by the Executive as the result of any transactions constituting a breach of any of the provisions of Sections 4.2 through 4.4, and the Executive hereby agrees to account for and pay over such Benefits to the Company. Each of the rights and remedies enumerated in this Section 4.5 shall be independent of the other, and shall be severally enforceable. and such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or equity. 4.6 If the Executive shall violate any covenant contained in Section 4.4, the duration of such covenant so violated shall be automatically extended for a period of two (2) years from the date on which the Executive permanently ceases such violation or for a period of two (2) years from the date of the entry by a court of competent jurisdiction of a final order or judgment enforcing such covenant, whichever period is later. 4.7 If any provision of Sections 4.2 or 4.4 is held to be unenforceable because of the scope, duration or area of its applicability, the tribunal making such determination shall have the power to modify such scope, duration, or area, or all of them to the minimum extent necessary so that these provisions would be enforceable, and such provision or provisions shall then be applicable in such modified form. (iv) The Executive acknowledges that he will be directly and materially involved as a senior executive in all important policy and operational decisions of the Company. The Executive further acknowledges that the scope of the foregoing restrictions has been specifically bargained between the Company and the Executive, each being fully informed of all relevant facts. Accordingly, the Executive acknowledges that the foregoing restrictions of this Section 4 are fair and reasonable, are minimally necessary to protect the Company, its stockholders and the public from the unfair competition of the Executive who, as a result of his employment with the Company, will have had unlimited access to the most confidential and important information of the Company, its business and future plans. The Executive furthermore acknowledges that no unreasonable harm or injury will be suffered by him from enforcement of the covenants contained herein and that he will be able to earn a reasonable livelihood following termination of his employment notwithstanding enforcement of the covenants contained herein. (v) Both the Company and the Executive do hereby further acknowledge and agree that none of the time span, scope or area covered by the restrictive covenants above is or are unreasonable, and that it is the specific intent of both the Company and the Executive that each and all of the provisions set forth in this section shall be valid and enforceable as specifically set forth hereinabove to the fullest extent possible. If it shall be judicially deter mined that any of the provisions set forth in this section shall not be valid or enforceable as specifically set forth hereinabove, such provision shall not be declared invalid but rather shall be modified in such manner so as to result in the same being valid and enforceable to the maximum extent permitted by law. It is further agreed and understood that, because of the highly confidential and sensitive nature of the Company's business, in the event of any violation by the Executive of any of the preceding provisions of this section, the Company may, in addition to any other remedies which it may have, obtain injunctive relief in any court of appropriate jurisdiction to enforce the terms hereof. 5. Laws of the State of Maryland to Govern. (a) This Agreement shall be construed and interpreted exclusively in accordance with the applicable laws of the State of Maryland, without regard to its conflicts of law provisions that might refer the construction or interpretation of this Agreement to the laws of another state. (b) If any legal action is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. 6. Definitions. As used in this Agreement, the term "Competitive Business" shall mean either: (A) any of the development, production, marketing or distribution of products and services of the information technology industry; or (B) any other product or service (including software-related products or services) of every nature, kind and description whatsoever which was under active development, production, marketing or distribution by the Company at the time of the termination of the Executive's employment, as documented by existing Company records at the time of such termination. 7. Miscellaneous Provisions. 7.1 Notices. Any notice, request, instruction or other document or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to be given upon (i) delivery in person, (ii) five (5) days after being deposited in the mail, postage prepaid, for mailing by certified or registered mail, (iii) one (1) day after being deposited with an overnight courier service, charges prepaid, or (iv) when transmitted by facsimile, with a copy simultaneously set as provided in causes, (ii) and (iii), in every case as follows: If to the Company, delivered or mailed to: IT Partners, Inc. 1006 Highland Drive Silver Spring, Maryland 20910 Attn: Daniel J. Klein with a copy delivered or mailed by the same method to: Kevin M. O'Connell, Esquire Semmes, Bowen & Semrnes 250 W. Pratt Street Baltimore, Maryland 21201 If to the Executive, delivered or mailed to: Christopher R. Corbett c/o A-COM, Inc. 14720-K Flint Lee Road Chantilly,. Virginia 22021 with a copy delivered or mailed by the same method to: Bernard R. Corbett, Esq. Law Office of Bernard R. Corbett 123 South Royal Street Alexandria, Virginia 22314 7.2 Entire Agreement. This Agreement sets forth the entire agreement of the parties with regard to the specific subject matter hereof and is intended to supersede all prior negotiations, understandings and agreements. No provisions of this Agreement may be waived or changed except by a writing signed by the party against whom such waiver or change is sought to be enforced. The failure of any party to require performance of any provision hereof shall in no manner affect his or its right at a later time to enforce such provision. 7.3 Article Headings. The article headings are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of any provision of this Agreement. 7.4 Confidential Nature. The parties acknowledge that all of the terms and conditions of this Agreement are of a confidential and sensitive nature and shall be disclosed or divulged to any third party whatsoever only to the extent required by any applicable requirement of law. 7.5 Further Assurances. The parties hereto hereby agree to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments from time to time, as either may at any time reasonably request in order to better assure and confirm unto each party their respective rights, powers and remedies conferred hereunder. 7.6 Arbitration. Except with respect to Section 4 hereof for which specific performance shall be available, any and all claims, demands, disputes, controversies, differences or misunderstandings arising out of or relating to this Agreement, or the failure or refusal to perform the whole or any part hereof, shall be settled by arbitration conducted in Baltimore, Maryland by the American Arbitration Association (the "AAA") in accordance with the rules thereof then pertaining. Each of the parties hereto hereby submit to the jurisdiction of the courts of the State of Maryland in any proceeding for the enforcement of this Agreement to arbitrate and for the enforcement of the award rendered by the arbitrators, and agree that judgment upon such award may be entered in any court, in or out of the State of Maryland, having jurisdiction thereof. The fees of the AAA shall be borne by the parties equally. 7.7 Specific Performance. Subject to Section 7.6 above, the parties hereto hereby expressly recognize and acknowledge that extensive and irreparable damage would result in the event that this Agreement is not specifically enforced. Therefore, their respective rights and obligations hereunder shall be enforceable in a court of equity by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies and any and all other remedies provided for in this Agreement shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 7.8 Severability. If any term or condition of this Agreement should be held invalid by a court, arbitrator or tribunal of competent jurisdiction in any respect, such invalidity shall not affect the validity of any other term or condition hereof. If any term or condition of this Agreement should be held to be unreasonable as to time, scope or otherwise by such a court, arbitrator or tribunal, it shall be construed by limiting or reducing it to the minimum extent so as to be enforceable under then applicable law. The parties hereto acknowledge that they would have executed this Agreement with any such invalid term or condition excluded or with any such unreasonable term or condition so limited or reduced. 7.9 Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the heirs, personal representatives, legal successors and assigns of the respective parties hereto; provided that, neither party shall assign this Agreement (by merges, consolidation, operation of law or otherwise) without the written consent of the others and any attempted assignment without said consent shall be null, void and without any effect whatsoever ab initio. Nothing in this Agreement shall be construed as granting to any person or entity whatsoever other than the parties hereto, and their respective successors and permitted assigns, and any remedy, claim or other privilege or right under or in respect of this Agreement or any provision hereof. 7.10 Construction. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. WITNESS WHEREOF, the parties have executed this Agreement under seal as of the date first above written. /s/Christopher Corbett --------------------- Christopher Corbett IT PARTNERS, INC By:/s/ Daniel J. Klein -------------------- Daniel J. Klein EX-10.12 21 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of May 30, 1997, between IT PARTNERS, INC. , a Delaware corporation ("ITPI") and DANIEL J. KLEIN ("Klein"). WHEREAS, ITPI desires to employ Klein and Klein desires to accept such employment on the terms and conditions hereinafter set forth; and WHEREAS, the parties hereby acknowledge that the goodwill, continued patronage, names, addresses and specific business requirements of ITPI's clients and customers, and the designs, procedures, systems, strategies, business methods and know-how of ITPI, having been acquired through ITPI's efforts and the expenditure of considerable time and money, are among the principal assets of ITPI; and WHEREAS, the parties hereby acknowledge that as a result of the position(s) in which Klein will be employed, Klein will develop special skills and knowledge peculiar to ITPI's business, whereby he will become, through his employment with ITPI, acquainted with the identities of the clients and customers of ITPI, and will acquire access to the techniques of ITPI in carrying on its business as well as other confidential and proprietary information; and WHEREAS, the parties hereto acknowledge that the Covenants set forth in Section 8 of this Agreement are necessary for the reasonable and proper protection of ITPI's confidential and proprietary information (as defined herein), customer relationships, and the goodwill of ITPI's business, and that such Covenants constitute a material portion of the consideration for Klein's employment hereunder. NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Term. ITPI agrees to employ Klein, and Klein agrees to be employed, as Chief Executive Officer and/or Chairman as determined by ITPI's Board of Directors (the "Board") from time to time for an initial term of five (5) years commencing June 1, 1997 and ending May 30, 2002 (the "Initial Term"), unless such employment is sooner terminated as provided herein. In such capacity, Klein shall perform such duties and have such responsibilities as are incident and customary to such offices, and shall have such powers and perform such other duties and responsibilities as may be assigned to him by the Board. During term hereof, Klein shall devote his full time, attention, skill and energy to the performance of his duties under this Agreement, and he shall comply with all reasonable professional requests of the Company. 2. Compensation. 2.1 Base Salary. In consideration of Klein's services hereunder, ITPI shall, beginning with the pay period commencing 6/1/1997, pay Klein a minimum base salary of One Hundred Twenty Thousand and 00/100 Dollars ($120,000) per annum, payable in equal monthly installments in accordance with ITPI's normal payroll practices. Such base salary will be reviewed annually, and may be increased (but not decreased) by ITPI's Board, or its Executive Committee in its sole discretion. 2.2. Bonus Compensation. In addition, Klein shall be eligible for an annual performance bonus of up to one hundred percent (100%) of Klein's base salary, based upon the achievement of certain defined annual performance goals consistent with the Company's 5-year operating plan established by the Board (including, without limitation, "threshold" goals, "plan" goals and "override" goals), in consultation with ITPI management, during the term hereof. a. Achievement by the Company of its "threshold" performance goal for a given year shall make Klein eligible to receive a bonus payment equal to twenty percent (20%) of his annual base salary. b. Achievement by the Company of its "plan" performance goal for a given year shall make Klein eligible to receive a bonus payment equal to sixty percent (60%) of his annual base salary. c. Achievement by the Company of its "override" performance goal for a given year shall make Klein eligible to receive a bonus payment equal to one hundred percent (100%) of his annual base salary. d. ITPI may, in its sole discretion, pay a bonus to Klein over and above any bonuses determined and paid to Klein in accordance with this Section. 3. Fringe Benefits. 3.1. During the term of this Agreement, Klein shall be entitled to participate in any and all fringe benefit plans, programs and practices which shall from time to time be sponsored by ITPI for the benefit of its executive employees, and shall be furnished with other services and perquisites appropriate to his position. 3.2. Without limiting the generality of the foregoing, Klein shall be entitled to the following benefits (regardless of whether such benefits are provided to other executives): a. Comprehensive medical insurance for Klein, his spouse, and his dependent children with no deductibles or co-insurance. b. Dental and vision insurance for Klein, his spouse, and his dependent children with no deductibles or co-nsurance. c. Group term life insurance with death benefits of not less than $1,000,000.00. d. Long-term disability insurance paying disability benefits of at least 70% of Klein's salary upon the termination of Klein's employment by reason of disability. e. Accidental death and dismemberment insurance benefits of not less than $1,000,000.00. f. Annual physical examinations. g. Financial planning services with a value of up to $2,500.00 per year during the term hereof. 4. Vacation and Sick Leave. Klein shall be entitled to a total of four (4) weeks of vacation each year during the term hereof. Unused vacation shall not accumulate from year to year. Klein may take his vacation at such time or times as shall not unreasonably interfere with the performance of his duties under this Agreement. Klein shall be entitled to paid sick leave and holidays in accordance with ITPI's announced policy for executive employees as in effect from time to time. 5. Reimbursement of Expenses. Klein is authorized to incur reasonable expenses in connection with the business of ITPI including expenses for travel and similar items. ITPI will reimburse Klein for all previously approved reasonable expenses upon itemized account of expenditures. 6. Illness or Disability. Klein shall receive full compensation for any period of illness or disability during the term of this Agreement until such time as he receives benefits under the long term disability insurance coverage referred to in Section 4, supra; provided, however, that such interim period of compensation for illness or disability shall not exceed six (6) months. Notwithstanding the foregoing, ITPI shall have the right to terminate this Agreement without further obligation to Klein if such illness or disability shall be of such a character as totally to disable Klein from rendering any services to ITPI for a period of more than six (6) consecutive months on giving at least thirty (30) days' written notice of intention to do so. 7. Termination of Employment. Klein's employment hereunder is employment at will, and either ITPI or Klein may terminate this Agreement and Klein's employment at any time, with or without cause. If ITPI terminates the Agreement other than (i) for Cause (defined below) or (ii) due to Klein's Disability as described in Section 6 hereof, Klein shall be entitled to receive, as his exclusive remedy for such termination, the payment of his then-current base salary for the remainder of the Term hereof (the "Severance Benefit"). Such Severance Benefit shall be payable to Klein in equal monthly installments consistent with ITPI's standard payroll practices, the first of such installments to be due within thirty (30) days after a qualifying termination hereof. For purposes of this Agreement, "Cause" shall mean drug or alcohol abuse, conviction of a felony or crime involving moral turpitude, a material breach of this Agreement, or any willful or grossly negligent act or omission by Klein having a material adverse effect on the business of ITPI. 8. Restrictive Covenants. a. Noncompetition. Klein agrees that during his employment, and for a period of two (2) years after the later of termination of this Agreement and termination of his employment with ITPI (the "Protected Period"), he will not: (a) engage in, manage, operate, control or supervise, or participate in the management, operation, control or supervision of, any business or entity that provides computer programming or consulting services, or any other products or services competitive with those currently provided by ITPI or those ITPI is providing as of the date of termination of Klein's employment with ITPI ("Competitive Activity"); or (b) have any ownership or financial interest, directly or indirectly, in any entity that engages in Competitive Activity, including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly owned corporation in which Klein owns less than 2% of the outstanding shares of such corporation), officer, director, employee, member, associate, principal, agent, representative or consultant, and shall not in any other manner, directly or indirectly, compete to any extent with such business of ITPI. Notwithstanding the foregoing, if the Agreement is terminated by ITPI and such termination is without Cause, as defined herein, Klein shall be bound by the terms of this subsection 8a only for the shorter of (i) two (2) years following such termination or (ii) the period of time following such termination during which ITPI, at ITPI's sole discretion, continues to pay Klein's then-current base salary. b. Nonsolicitation. During Klein's employment with ITPI, and during the Protected Period, Klein agrees not to solicit or conduct business, without ITPI's consent, with any client or customer of ITPI (past or present), whether or not ITPI is doing work for such client or customer as of the date of termination of Klein's employment with ITPI, as well as any prospective client or customer of ITPI, or to contact, solicit, interfere with or attempt to entice in any form, fashion or manner any employee of ITPI for the purpose of inducing that employee to terminate his/her employment with ITPI or act in any way that would be contrary to the best interests of ITPI. c. Nondisclosure. During and after Klein's employment with ITPI, Klein agrees not to disclose, or to knowingly allow any other employee to disclose, to any other person or business entity, or use for personal profit or gain, any confidential or proprietary information of ITPI, regardless of whether the same shall be or may have been originated, discovered or invented by Klein or by Klein in conjunction with others. For purposes of this Agreement, the term "confidential or proprietary information" shall include, without limitation: the names, addresses and telephone numbers of past, present and prospective clients or customers of ITPI, as well as products, designs, business plans, proposed business development, marketing strategies, customers requirements, contractual provisions, employee capabilities, proposed marketing initiatives, pricing methods, company earning, computer software and reporting systems, and the procedures, systems and business methods of ITPI. d. Geographic Scope of Restrictive Covenants. The geographic area in which Klein shall not engage in any of the prohibited activities listed in subsections 8a and 8b hereof shall be limited to the continental United States. 9. Remedies for Breach. Klein hereby acknowledges and agrees that a violation of any of the covenants set forth in Section 8 hereof (the "Covenants") would result in immediate and irreparable harm to ITPI, and that ITPI's remedies at law, including, without limitation, the award of money damages, would be inadequate relief to ITPI for any such violation. Therefore, any violation or threatened violation by Klein of the Covenants shall give ITPI the right to enforce such Covenants through specific performance, temporary restraining order, preliminary or permanent injunction, and other equitable relief. Such remedies shall be cumulative and in addition to any other remedies ITPI may have, at law or in equity. 10. Notice of Subsequent Employment; Etc. Klein agrees that he shall, during the two (2) year period following the termination of his employment with ITPI, give written notice to ITPI of the names and addresses of each person, firm, corporation or other entity by whom he is employed or for whom he acts as director, agent, representative, member, associate or consultant. Klein further agrees that if at any time during such two (2) year period he conducts business on his own account, or through a proprietary interest in any business, firm, partnership or other entity, or as contractor, or owns any stock in a corporation, Klein shall give written notice to ITPI of the name, address and nature of any such business. 11. Return of ITPI Property; Assignment of Inventions. a. Return of Property. Upon the termination of Klein's employment with ITPI for any reason, Klein shall leave with or return to ITPI all personal property belonging to ITPI ("ITPI Property") that is in Klein's possession or control as of the date of such termination of employment, including, without limitation, all records, papers, drawings, notebooks, specifications, marketing materials, software, reports, proposals, equipment, or any other device, document or possession, however obtained, whether or not such ITPI Property contains confidential or proprietary information of ITPI as described in Section 8c hereof. b. Assignment of Inventions. If at any time or times during Klein's employment, Klein shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called "Developments") that (a) relates to the business of ITPI or any of the products or services being developed, manufactured or sold by ITPI or that may be used in relation therewith, (b) results from tasks assigned him by ITPI or (c) results from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for by ITPI, such Developments and the benefits thereof shall immediately become the sole and absolute property of ITPI and its assigns, and Klein shall promptly disclose to ITPI (or any persons designated by it) each such Development and hereby assigns any rights Klein may have or acquire in the Developments and benefits and/or rights resulting therefrom to ITPI and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto (with all necessary plans and models) to ITPI. Upon disclosure of each Development to ITPI, Klein will, during his employment and at any time thereafter, at the request and expense of ITPI, sign, execute, make and do all such deeds, documents, acts and things as ITPI and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of ITPI alone (unless ITPT otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. In the event ITPI is unable, after reasonable effort, to secure Klein's signature on any letters patent, copyright or other analogous protection relating to a Development, whether because of Klein's physical or mental incapacity or for any other reason, Klein hereby irrevocably designates and appoints ITPI and its duly authorized officers and agents as Klein's agents and attorneys-in-fact, to act for and in behalf of Klein and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other analogous protection thereon with the same legal force and effect as if executed by Klein. 12. Survival. The provisions of Sections 8, 9, 10 and 11 hereof shall survive the termination of this Agreement, regardless of the manner or cause of such termination. 13. Effect of Agreement. This Agreement sets forth the final and complete Agreement of the parties. It shall not be assigned by Klein and may not be modified except by way of a writing executed by both parties. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their successors and assigns. 14. Governing Law. The provisions of this Agreement and any disputes arising hereunder shall be governed by and construed in accordance with the laws of the State of Delaware. [The next page is the Signature Page.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their seals affixed hereto as of the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein (SEAL) --------------------- Name: Daniel J. Klein Title: President EX-10.13 22 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of January 8, 1998 by and between John D. Bamberger, residing at 2712 Murfield Court, Rochester Hills, Michigan 48306 (the "Executive") and Sequoia Diversified Products, Inc. (f/k/a ITP No. 10, Inc., a Delaware corporation, having its principal office at 107 South Squirrel Road, Auburn Hills, Michigan 48326 (the "Company"). RECITALS: A. Pursuant to an Agreement and Plan of Organization (the "Merger Agreement") made as of January 8, 1998, by and among (i) the Company, (ii) IT Partners, Inc., a Delaware corporation and sole stockholder of the Company ("ITP"), (iii) Sequoia Diversified Products, Inc., a Michigan corporation ("Target"), and (iv) the stockholders of Target named therein; B. ITP and the Company are utilizing the assets acquired by operation of the Merger (as defined in the "Merger Agreement") to conduct a business (the "Business") which is engaged in the design, manufacture and sale of products and services to the information technology industry and such Business will continue hereafter to be operated and conducted by the Company; and C. ITP and the Company desire to assure themselves of the Executive's services with respect to the operation of the Business. NOW, THEREFORE, in exchange for good and valuable consideration, both the receipt and legal sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Employment, Duties and Acceptance 1.1 The Company hereby employs the Executive during the Term (as hereinafter defined) of this Agreement as the Vice Chairman, Chief Executive Officer and Treasurer of Target. The Executive shall report directly to the President of ITP and shall be subject to the reasonable direction, policies, plans, oversight and review of the Board of Directors of ITP. 1.2 The Company may assign to the Executive such other executive and administrative duties for the Company or ITP as may be determined by the Board of Directors of the Company consistent with the Executive's expertise, experience and prior duties with Target. The Executive shall perform such additional duties and functions without separate compensation, unless otherwise authorized by the Board of Directors. 1.3 The Executive accepts such employment and agrees to devote his full and exclusive business time, energies, attention and best efforts to the performance of his duties hereunder, which may include such travel as may reasonably be required of him. 1.4 The Executive shall not, without the prior written consent of the Company, during the Term of this Agreement be engaged in any other business activity involving a Competitive Business (as defined in Section 6), whether or not pursued for gain, profit or other pecuniary advantage; but this shall not be construed as preventing the Executive from making and supervising personal investments, provided they: (a) will not cause a breach of Section 4.4, below; and (b) will not materially interfere with the performance of the Executive's duties hereunder. 1.5 All of the Executive's work product and work in process created during the Term of this Agreement shall be considered "work made for hire" under the U.S. Copyright Act, 17 U.S.C. section 101 et seq. and all intellectual property rights therein shall be the sole and exclusive property of the Company. In addition, in the event that any work product or work in process created during the Term of the Agreement is not considered to be a work made for hire, the Executive hereby agrees, at the Company's expense, to assign all proprietary rights in such work product or work in process to the Company. 2. Compensation; Benefits; Relocation 2.1 Base Salary. As partial compensation during the Term of this Agreement for all of the Executive's services to be rendered hereunder, Company agrees to pay, or cause to be paid, to the Executive, in the manner hereinafter provided, an amount comprised of base compensation equal to Two Hundred Thousand Dollars ($200,000.00) per annum (the "Base Salary"), to be paid in biweekly installments, less all such sums as may be required by law to be withheld or deducted. Such Base Salary shall be subject to normal periodic review based on the policies and practices of the Company, provided that in no event shall the Base Salary be less than the dollar amount set forth in the preceding sentence, unless mutually agreed upon by the parties. 2.2 Business Expenses. The Executive will be reimbursed for automobile, travel, entertainment, lodging and other related reasonable business expenses actually incurred in connection with his work upon terms and conditions established by ITP from time to time and consistently applied for all of the senior executive officers of its operating subsidiaries. 2.3 Vacation; Sick Leave. The Executive shall be entitled to periods of vacation not less than three (3) weeks annually and sick leave during the Term of this Agreement upon terms and conditions established by ITP from time to time and consistently applied for all of the senior executive officers of its operating subsidiaries. 2.4 Other Benefits. The Executive shall receive hospitalization, major medical, disability and pension plan benefits upon terms and conditions established by ITP from time to time and consistently applied for all of the senior executive officers of its operating subsidiaries; it being understood that there is no assurance with respect to the establishment of such plans or, if established, the continuation of such plans during the term of this Agreement. 2.5 Insurance. The Company may, in the exercise of its sole and absolute discretion, obtain a policy or policies of insurance covering the life of the Executive. The Executive covenants that he will cooperate fully by performing all requirements of the insurer which are reasonably necessary to the issuance and maintenance of any such policies, including but not limited to submitting to a physical examination and providing historical medical records. The Company further agrees that it will pay all premiums of any such policy or policies. 2.6. Relocation. The Executive shall not be required to relocate without his consent. 3. Term and Termination. 3.1 Term and Renewal. The initial term of this Agreement shall be four (4) years, commencing as of January 8, 1998 and continuing through January 7, 2002 (the "Initial Expiration Date"), unless sooner terminated as herein provided (the "Initial Term"). The Initial Term shall renew automatically for subsequent terms of one (1) year each (each a "Renewal Term"), unless at least sixty (60) days before the Initial Expiration Date, or at least sixty (60) days in advance of the expiration of any subsequent Renewal Term (as the case may be), either party gives the other party notice in writing of its intent not to renew this Agreement. As used in this Agreement, the term "Term" shall mean either the Initial Term or any Renewal Term, as the case may be. 3.2 Termination Upon Death. If the Executive dies during the Term of this Agreement, this Agreement shall immediately terminate, except that the Company shall for a period of one hundred eighty (180) days following the date of his death pay to the legal representatives of the Executive's estate the Base Salary, as then in effect. Such payment will be made within thirty (30) days of the date of death. 3.3 Termination for Proper Cause. (a) The Company, by written notice to the Executive, may terminate this Agreement for proper cause and the continuance thereof for ten (10) business days' after written notice. As used herein, "proper cause" shall exclusively mean that the Executive has: (i) refused or willfully failed to carry out specific directions of the Board of Directors of the Company which are not in conflict with the terms of this Agreement, or willfully refused or willfully failed to perform a material part of his duties hereunder; (ii) committed a material breach of any of the provisions of Article 4 of this Agreement; (iii) acted in a fraudulent or dishonest manner in his relations with the Company that has served to adversely and materially harm the Company; (iv) committed larceny, embezzlement, conversion or any act involving the misappropriation of funds in the course of his employment; or (v) been convicted of any crime involving an act of moral turpitude. The determination as to whether proper cause (as defined above) exists shall be made in the good faith opinion of ITP's Board of Directors by the affirmative vote of two- thirds (2/3) of all of the directors (but not including the Executive if the Executive is a director). In the event of a termination under subparagraph (a) above, all Base Salary and other benefits under the terms of this Agreement to be paid or provided to the Executive shall immediately cease, provided that the Executive shall be entitled to receive all such compensation and benefits through the effective date of such termination. (b) In the event the Company terminates this Agreement by dismissing the Executive without proper cause, the Company shall pay the Executive his Base Salary (equal to the amount paid for the full fiscal year immediately preceding such termination or, if such termination occurs during the first full fiscal year, his first year's Base Salary) and continue to provide to him the benefits as set forth herein for the balance of the entire applicable Initial Term or Renewal Term, as the case may be. 3.4 Termination by Executive for Good Reason. In the event the Executive terminates this Agreement for "good reason," the Company shall pay the Executive his Base Salary and provide to him the benefits as set forth herein for the balance of the entire applicable Initial Term or Renewal Term, as the case may be. For purposes of this section, the Executive shall have "good reason" to voluntarily terminate his employment if (i) the Company shall have materially and substantially reduced the job description of such Executive or assigned to the Executive significant duties which are materially inconsistent with the Executive expertise, experience and prior duties with the Target, as the case may be or (ii) ITP has not completed an initial public offering of its capital stock under the Securities Act of 1933, as amended, pursuant to a registration statement filed with, and declared effective by, the Securities and Exchange Commission by June 30, 2000. 3.5 Termination Due to Disability (a) The Company, by notice to the Executive, may upon thirty (30) days prior written notice, terminate this Agreement if the Executive shall become disabled. Notwithstanding such termination, the Company shall for a period of one hundred eight days (180) days following the date of such termination both pay to the Executive all monies due hereunder up to the date of such notice, including Base Salary and additionally provide the benefits as set forth herein. (b) For purposes of this Agreement, the terms "disabled" or "disability" (i) shall mean the Executive's inability, for a period of one hundred eighty (180) consecutive days, to devote his full time to those duties as an employee of the Company which he was performing prior to his disability, and (ii) shall be deemed to have occurred on the one hundred eighty-first (181st) day of his inability to devote his full time to his duties as an employee of the Company. If by the one hundred eightieth (180th) consecutive day of absence the Executive can provide evidence, in the form of a doctor's certificate, of the likelihood of his return to work within the next one hundred eighty (180) days, "disability" shall be deemed to have occurred on the three hundred sixty-first (361st) day of absence. The definition of "disabled" or "disability" may be altered by the affirmative vote of two- thirds (2/3) of the Board of Directors of ITP on a case-by- case basis, for example, to exclude disability which lasts for longer than one hundred eighty (180) consecutive days but is not permanent, or to include disability where each absence does not total one hundred eighty (180) consecutive days but involves absences frequent enough to be considered permanent by the Board of Directors. 4. Protection of Confidential Information; Non-Competition. 4.1 The Executive acknowledges that: (a) The established nature of the Business was material to the decision of ITP to acquire and conduct the Business and for the Company to employ the Executive hereunder. (b) As a result of his employment by the Company and his operation of the Business, the Executive has obtained and will obtain certain proprietary, secret and confidential information concerning the business of the Company and ITP, including, without limitation, financial and organizational information, the identity of customers and sources of supply, their needs and requirements, the nature and extent of contracts with them, and related cost price and sales information. (c) The Company and ITP will suffer immediate, irreparable and substantial damage which will be difficult to compute if, during the period of his employment with the Company or thereafter, the Executive should enter a competitive business with any material segment of the Company's and ITP's business (whether as an employee, shareholder, director, officer or otherwise) or should divulge secret and confidential information relating to the business of the Company and ITP heretofore or hereafter acquired by him in the course of his management of the Business and his employment by the Company. (d) The provisions of this Agreement are reasonable and necessary for the protection of the business of the Company and ITP. 4.2 The Executive agrees that he will not at any time, either during the Term of this Agreement or thereafter, divulge to any person, firm or corporation any confidential information obtained or learned by him during the course of his employment with the Company, or prior to the commencement thereof in the course of his employment by and management of the Business, with regard to the operational, financial, organizational, business or other affairs of the Business of ITP, the Company, any of their subsidiaries, or any of their officers and directors, including, without limitation, trade "know how," secrets, customer lists, sources of supply, pricing policies, operational methods or technical processes, except: (i) in the course of faithfully performing his duties hereunder, (ii) with the Company's express written consent, (iii) to the extent that any such information is in the public domain other than as a result of the Executive's breach of any of his obligations hereunder, or (iv) where required to be disclosed by court order, subpoena or other governmental process. In the event that the Executive shall be required to make disclosure pursuant to the provisions of clause (iv) of the preceding sentence, the Executive promptly but in no event more than forty-eight (48) hours after learning of such subpoena, court order, or other governmental process, shall notify, by personal delivery or by facsimile, confirmed by mail or by certified mail, return receipt requested, the Company and, at the Company's expense, the Executive shall: (a) take all reasonably necessary steps requested by the Company to defend against the enforcement of such subpoena, court order or other governmental process, and (b) permit the Company to intervene and participate with counsel of its choice in any proceeding or actions relating to the enforcement thereof. 4.3 Upon termination of his employment with the Company, or at any time the Company's Board of Directors may reasonably request, the Executive will promptly deliver to the Company all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof) relating to the business of the Company and ITP and all property associated therewith, which he may then possess or have under his control. 4.4 During the Term of his employment with the Company and for a period of one (1) year thereafter, except in the event of a termination without proper cause prior to the end of the Initial Expiration Date, the Executive shall not, without the express prior written permission of the Company, in the State of Michigan, or any adjacent state, directly or indirectly: (i) enter into the employ of or render any significant and material services to any person, firm or corporation engaged in any Competitive Business (as defined in Section 6); (ii) engage in any Competitive Business for his own account; (iii) become associated with or interested in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor or in any other relationship or capacity; or (iv) solicit, interfere with, or endeavor to entice away from the Company any of its employees, customers or sources of supply. Nothing in this Agreement, however, shall preclude the Executive from investing his personal assets in the securities of any corporation or other business entity which is engaged in a Competitive Business if such securities are traded on a national stock exchange or in over-the-counter market and if such investment does not result in his actually and/or beneficially owning, at any time, more than five percent (5%) of the publicly traded equity securities of such competitor. Notwithstanding any other provision of this Agreement, in the event of a termination occurring prior to the end of the Initial Term either by the Company without proper cause or a voluntary termination by the Executive for good reason or in the event the Notes (as defined in the Merger Agreement) are not paid in accordance with the terms thereof, the Executive shall be free from the restrictions set forth in this Section 4.4. 4.5 If the Executive commits a breach, or threatens to commit a breach, of any of the provisions of Article 4, the Company shall have the right and remedy: (a) to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Executive that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any such breach or threatened breach will cause irreparable injury to the Company and that money damages alone will not provide an adequate remedy to the Company; and (b) to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits (collectively "Benefits") derived or received by the Executive as the result of any transactions constituting a breach of any of the provisions of Article 4, and the Executive hereby agrees to account for and pay over such Benefits to the Company. Each of the rights and remedies enumerated in this Section 4.5 shall be independent of the other, and shall be severally enforceable, and such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or equity. 4.6 If the Executive shall violate any covenant contained in Article 4, the duration of such covenant so violated shall be automatically extended for a period of two (2) years from the date on which the Executive permanently ceases such violation or for a period of two (2) years from the date of the entry by a court of competent jurisdiction of a final order or judgment enforcing such covenant, whichever period is later. 4.7 If any provision of Article 4 is held to be unenforceable because of the scope, duration or area of its applicability, the tribunal making such determination shall have the power to modify such scope, duration, or area, or all of them to the minimum extent necessary so that these provisions would be enforceable, and such provision or provisions shall then be applicable in such modified form. 4.8 The Executive acknowledges that he will be directly and materially involved as a senior executive in many important policy and operational decisions of the Company and ITP. The Executive further acknowledges that the scope of the foregoing restrictions has been specifically bargained between the Company and the Executive, each being fully informed of all relevant facts. Accordingly, the Executive acknowledges that the foregoing restrictions of this Section 4 are fair and reasonable, are minimally necessary to protect the Company and ITP, its stockholders and the public from the unfair competition of the Executive who, as a result of his employment with the Company, will have had access to the confidential and important information of the Company and ITP, its business and future plans. The Executive furthermore acknowledges that no unreasonable harm or injury will be suffered by him from enforcement of the covenants contained herein and that he will be able to earn a reasonable livelihood following termination of his employment notwithstanding enforcement of the covenants contained herein. 4.9 Both the Company and the Executive do hereby further acknowledge and agree that none of the time span, scope or area covered by the restrictive covenants above is or are unreasonable, and that it is the specific intent of both the Company and the Executive that each and all of the provisions set forth in this section shall be valid and enforceable as specifically set forth hereinabove to the fullest extent possible. If it shall be judicially determined that any of the provisions set forth in this section shall not be valid or enforceable as specifically set forth hereinabove, such provision shall not be declared invalid but rather shall be modified in such manner so as to result in the same being valid and enforceable to the maximum extent permitted by law. It is further agreed and understood that, because of the highly confidential and sensitive nature of the Company's and ITP's business, in the event of any violation by the Executive of any of the preceding provisions of this section, the Company may, in addition to any other remedies which it may have, obtain injunctive relief in any court of appropriate jurisdiction to enforce the terms hereof. 5. Laws of the State of Maryland to Govern. (a) This Agreement shall be governed by and construed and interpreted exclusively in accordance with the applicable laws of the State of Maryland, without regard to its conflicts of law provisions that might refer the construction or interpretation of this Agreement to the laws of another state. (b) If any legal action is necessary to enforce the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees in addition to any other relief to which that party may be entitled. (c) Each of the parties hereto hereby submit to the jurisdiction of the courts of the State of Michigan in any proceeding for the enforcement of this Agreement. 6. Definitions. As used in this Agreement, the term "Competitive Business" shall mean either: (A) any of the development, production, marketing or distribution of products and services of the information technology industry engaged in, or to the knowledge of the Executive, contemplated by, the Company or ITP during the Term of the Executive's employment; or (B) any other product or service (including software-related products or services) of every nature, kind and description whatsoever which was under active development, production, marketing or distribution by the Company, ITP, or any of their subsidiaries at any time prior to or during the Term of the Executive's employment. 7. Miscellaneous Provisions. 7.1 Notices. Any notice, request, instruction or other document or communication required or permitted to be given under this Agreement shall be in writing and shall be deemed to be given upon (i) delivery in person, (ii) five (5) days after being deposited in the mail, postage prepaid, for mailing by certified or registered mail, (iii) one (1) day after being deposited with an overnight courier service, charges prepaid, or (iv) when transmitted by facsimile, with a copy simultaneously sent as provided in clauses (ii) and (iii), in every case as follows: If to the Company, delivered or mailed to: c/o Sequoia Diversified Products, Inc. 9881 Broken Land Parkway Suite 102 Columbia, Maryland 21046 Attn: Daniel J. Klein, Chairman of the Board with a copy delivered or mailed by the same method to: Earl S. Wellschlager, Esquire Piper & Marbury, L.L.P. 36 South Charles Street Baltimore, Maryland 21201 If to the Executive, delivered or mailed to: John D. Bamberger 2712 Murfield Court Rochester Hills, Michigan 48306 with a copy delivered or mailed by the same method to: J. Michael Bernard, Esquire Dykema Gossett PLLC 400 Renaissance Center Detroit, Michigan 48243-1668 7.2 Entire Agreement. This Agreement sets forth the entire agreement of the parties with regard to the specific subject matter hereof and is intended to supersede all prior negotiations, understandings and agreements. No provisions of this Agreement may be waived or changed except by a writing signed by the party against whom such waiver or change is sought to be enforced. The failure of any party to require performance of any provision hereof shall in no manner affect his or its right at a later time to enforce such provision. 7.3 Article Headings. The article headings are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope or intent of any provision of this Agreement. 7.4 Confidential Nature. The parties acknowledge that all of the terms and conditions of this Agreement are of a confidential and sensitive nature and shall be disclosed or divulged to any third party whatsoever only to the extent required by any applicable requirement of law. 7.5 Further Assurances. The parties hereto hereby agree to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments from time to time, as either may at any time reasonably request in order to better assure and confirm unto each party their respective rights, powers and remedies conferred hereunder. 7.6 Arbitration. Except with respect to Article 4 hereof for which specific performance shall be available, any and all claims, demands, disputes, controversies, differences or misunderstandings arising out of or relating to this Agreement, or the failure or refusal to perform the whole or any part hereof, shall be settled by arbitration conducted in Detroit, Michigan by the American Arbitration Association (the "AAA") in accordance with the rules thereof then pertaining. With respect to the determination of "proper cause" by the Board of Directors of ITP under Section 3.3 hereof, the sole role of the arbitrators will be to determine whether the Board of Directors of ITP acted in good faith. Each of the parties hereto hereby submit to the jurisdiction of the courts of the State of Michigan in any proceeding for the enforcement of this Agreement to arbitrate and for the enforcement of the award rendered by the arbitrators, and agree that judgment upon such award may be entered in any court, in or out of the State of Michigan, having jurisdiction thereof. The fees of the AAA shall be borne by the parties equally. 7.7 Specific Performance. Subject to Section 7.6 above, the parties hereto hereby expressly recognize and acknowledge that extensive and irreparable damage would result in the event that this Agreement is not specifically enforced. Therefore, their respective rights and obligations hereunder shall be enforceable in a court of equity by a decree of specific performance and appropriate injunctive relief may be applied for and granted in connection therewith. Such remedies and any and all other remedies provided for in this Agreement shall, however, be cumulative and not exclusive and shall be in addition to any other remedies which any party may have under this Agreement or otherwise. 7.8 Severability. If any term or condition of this Agreement should be held invalid by a court, arbitrator or tribunal of competent jurisdiction in any respect, such invalidity shall not affect the validity of any other term or condition hereof. If any term or condition of this Agreement should be held to be unreasonable as to time, scope or otherwise by such a court, arbitrator or tribunal, it shall be construed by limiting or reducing it to the minimum extent so as to be enforceable under then applicable law. The parties hereto acknowledge that they would have executed this Agreement with any such invalid term or condition excluded or with any such unreasonable term or condition so limited or reduced. 7.9 Binding Effect. This Agreement shall be binding upon, and inure to the benefit of, the heirs, personal representatives, legal successors and assigns of the respective parties hereto; provided that, neither party shall assign this Agreement (by merger, consolidation, operation of law or otherwise) without the written consent of the others and any attempted assignment without said consent shall be null, void and without any effect whatsoever ab initio. Nothing in this Agreement shall be construed as granting to any person or entity whatsoever other than the parties hereto, and their respective successors and permitted assigns, and any remedy, claim or other privilege or right under or in respect of this Agreement or any provision hereof. 7.10 Construction. The parties acknowledge that each party and its counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of the date first above written. WITNESS: EXECUTIVE: /s/ John D. Bamberger (SEAL) ---------------------------- John D. Bamberger ATTEST: COMPANY: /s/ Jamie E. Blech By: /s/ Daniel J. Klein (SEAL) ----------------------------- Name: Title: EX-10.14 23 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of September 16, 1997, between IT PARTNERS, INC., a Delaware corporation ("ITPI") and Christine E. Norcross ("Norcross"). WHEREAS, ITPI desires to employ Norcross and Norcross desires to accept such employment on the terms and conditions hereinafter set forth; and WHEREAS, the parties hereby acknowledge that the goodwill, continued patronage, names, addresses and specific business requirements of ITPI's clients and customers, and the designs, procedures, systems, strategies, business methods and know-how of ITPI, having been acquired through ITPI's efforts and the expenditure of considerable time and money, are among the principal assets of ITPI; and WHEREAS, the parties hereby acknowledge that as a result of the position(s) in which Norcross will be employed, Norcross will develop special skills and knowledge peculiar to ITPI's business, whereby she will become, through her employment with ITPI, acquainted with the identities of the clients and customers of ITPI, and will acquire access to the techniques of ITPI in carrying on its business, as well as other confidential and proprietary information; and WHEREAS, the parties hereto acknowledge that the Covenants set forth in Section 10 of this Agreement are necessary for the reasonable and proper protection of ITPI's confidential and proprietary information (as defined herein), customer relationships, and the goodwill of ITPI's business, and that such Covenants constitute a material portion of the consideration for Norcross's employment hereunder, NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Term. ITPI agrees to employ Norcross, and Norcross agrees to be employed, as Chief Operating Officer for an initial term of three (3) years commencing October 13, 1997 and ending October 12, 2000 (the "Initial Term"), unless such employment is sooner terminated as provided herein. After the Initial Term, thin Agreement shall renew automatically for successive one (1) year terms. In such capacity, Norcross shall perform such duties and have such responsibilities as are incident and customary to such offices, and shall have such powers and perform such other duties and responsibilities as may be assigned to her by the Board of Directors (the "Board"). During term hereof, Norcross shall devote her full time, attention, skill and energy to the performance of her duties under this Agreement, and she shall comply with all reasonable professional requests of the Company. 2. Compensation. 2.1. Base Salary. In consideration of Norcross's services hereunder, ITPI shall, beginning with the pay period commencing October 1, 1997, pay Norcross a minimum base salary of One Hundred Thirty Thousand and 00/100 Dollars ($130,000) per annum, payable in equal biweekly installments in accordance with ITPI's normal payroll practices. Such base salary will be reviewed annually, and may be increased (but not decreased) by ITPI's Board, or its Executive Committee in its sole discretion. 2.2. Bonus Compensation. In addition, Norcross shall be eligible for an annual performance bonus of up to seventy-five percent (75%) of Norcross's base salary, based upon the achievement of certain defined annua1 performance goals consistent with the Company's 5-year operating plan established by the Board (including, without limitation, "threshold" goals, "plan" goals and "override" goals), in consultation with ITPI management, during the term hereof. At Norcross's discretion, up to fifty percent (50%) of the annual performance bonus amount may be paid in the form of stock options. Such options shall be granted at an exercise price equal to the then current price per share and shall vest forty percent (40%) after two years and twenty percent (20%) each year thereafter until fully vested. a. Achievement by the Company of its '' threshold" performance goa1 for a given year shall make Norcross eligible to receive a bonus payment equal to fifteen percent (15%) of her annual base salary. b. Achievement by the Company of its "plan" performance goal for a given year shall make Norcross eligible to receive a bonus payment equal to forty-five percent (45%) of her annual base salary. c. Achievement by the Company of its "override'' performance goal for a given year shall make Norcross eligible to receive a bonus payment equal to seventy-five percent (75%) of her annual base salary. d. ITPI may, in its sole discretion, pay a bonus to Norcross over and above any bonuses determined and paid to Norcross in accordance with this Section. 3. Signing Bonus. Norcross will be paid a signing bonus of Seventy Five Thousand Dollars ($75,000), one-third (1/3) to be paid on the commencement of employment with ITPI, one-third (1/3) to be paid on April 15, 1998, and one-third (1/3) to be paid October 15, 1998. In the event that Norcross voluntarily leaves employment with ITPI prior to December 31, 1998, she must repay the signing bonus to ITPI, less any actual relocation expenses she incurred in relocating to the Baltimore-Washington area. 4. Relocation and Moving Expenses. ITPI will pay reasonable expenses for Norcross for up to twelve (12) months for temporary housing, furniture rental, automobile rental, and airfare from and to Atlanta up to a maximum of two thousand five hundred dollars ($2,500) per month. In addition, ITPI will pay reanonable moving expenses for Norcross from Atlanta to the Baltimore-Washington area up to a maximum of Ten Thousand Dollars ($10,000). 5. Stock Options. In addition, sixty (60) days after the start of employment by ITPI, and in consideration of accepting employment as Chief Operating Officer, Norcross shall be granted 50,000 stock options at the then current price per share, and which shall vest forty percent (40%) after two years and twenty percent (20%) each year thereafter until fully vested. 6. Fringe Benefits. During the term of this Agreement, Norcross shall be entitled to participate in any and all fringe benefit plans, programs and practices, including life insurance, which shall from time to time be sponsored by ITPI for the benefit of its executive employees, and shall be furnished with other services and perquisites appropriate to her position. 7. Vacation and Sick Leave. Norcross shall be entitled to a total of four (4) weeks of vacation during the term hereof. Unused vacation shall not accumulate from year to year. Norcross may take her vacation at such time or times as shall not unreasonably interfere with the performance of her duties under this Agreement. Norcross shall be entitled to paid sick leave and holidays in accordance with ITPI 's announced policy for executive employees as in effect from time to time. 8. Reimbursement of Expenses. Norcross is authorized to incur reasonable expenses in connection with the business of ITPI including expenses for travel and similar items. ITPI will reimburse Norcross for all previously approved reasonable expenses upon itemized account of expenditures. 9. Illness or Disability. Norcross shall receive full compensation for any period of illness or disability during the term of this Agreement until such time as she receives benefits under the long term disability insurance coverage provided by ITPI, provided, however, that such interim period of compensation for illness or disability shall not exceed six (6) months. Notwithstanding the foregoing, ITPI shall have the right to terminate this Agreement without further obligation to Norcross if such illness or disability shall be of such a character as totally to disable Norcross from rendering any services to ITPI for a period of more than six (6) consecutive months on giving at least thirty (30) days' written notice of intention to do so. 10, Termination of Employment. Norcross's employment hereunder is employment at will, and either ITPI or Norcross may terminate this Agreement and Norcross's employment at any time, with or without cause. If ITPI terminates the Agreement other than (i) for Cause (defined below) or (ii) due to Norcross's Disability as described in Section 6 hereof, Norcross shall be entitled to receive, as her exclusive remedy for such termination, the payment of her then-current base salary for the longer of (A) six months from the date of termination or (B) the remainder of the Term hereof (the "Severance Benefit"). Such Severance Benefit shall be payable to Norcross in equal monthly installments consistent with ITPI's standard payroll practices, the first of such installments to be due within thirty (30) days after a qualifying termination hereof. For purposes of this Agreement, "Cause" shall mean drug or alcohol abuse, conviction of a felony or crime involving moral turpitude, a material breach of this Agreement, or any willful or grossly negligent act or omission by Norcross having a material adverse effect on the business of ITPI. 11. Restrictive Covenants. a. Noncompetition. Norcross agrees that during her employment, and for the remainder of the Term hereof (the "Protected Period"), she shall not: (a) engage in, manage, operate, control or supervise, or participate in the management, operation, control or supervision of, any business or entity that provides computer programining or consulting services, or any other products or services competitive with those currently provided by ITPI or those ITPI is providing as of the date of termination of Norcross's employment with ITPI ("Competitive Activity"); or (b) have any ownership or financial interest, directly or indirectly, in any entity that engages in Competitive Activity, including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly owned corporation in which Norcross owns less than 2% of the outstanding shares of such corporation), officer, director, employee, member, associate, principal, agent, representative or consultant, and shall not in any other manner, directly or indirectly, compete to any extent with such business of ITPI. b. Nonsolicitation. During Norcross's employment with ITPI, and during the Protected Period, Norcross agrees not to solicit or conduct business, without ITPI's consent, with any client or customer of ITPI (past or present), whether or not ITPI is doing work for such client or customer as of the date of termination of Norcross's Employment with ITPI, as well as any prospective client or customer of ITPI, or to contact, solicit, interfere with or attempt to entice in any form, fashion or manner any employee of ITPI for the purpose of inducing that employee to terminate her/her employment with ITPI or act in any way that would be contrary to the best interests of ITPI. c . Nondisclosure. During and after Norcross's employment with ITPI, Norcross agrees not to disclose, or to knowingly allow any other employee to disclose, to any other person or business entity, or use for personal profit or gain, any confidential or proprietary information of ITPI, regardless of whether the same shall be or may have been originated, discovered or invented by Norcross or by Norcross in conjunction with others. For purposes of this Agreement, the term "confidential or proprietary information'' shall include, without limitation: the names, addresses and telephone numbers of past, present and prospective clients or customers of ITPI, as well as products, designs, business plans, proposed business development, marketing strategies, customers requirements, contractual provisions, employee capabilities, proposed marketing initiatives, pricing methods, company earnings, computer software and reporting systems, and the procedures, systems and businees methods of ITPI. d. Geographic Scope of Restrictive Covenants. The geographic area in which Norcross shall not engage in any of the prohibited activities listed in subsections 8a and 8b hereof shall be limited to the continental United States. 12. Remedies for Breach. Norcross hereby acknowledges and agrees that a violation of any of the covenants see forth in Section 8 hereof (the "Covenants") would reoult in immediate and irreparable harm to ITPI, and that ITPI's remedies at law, including, without limitation, the award of money damages, would be inadequate relief to ITPI for any such violation. Therefore, any violation or threatened violation by Norcross of the Covenants shall give ITPI the right to enforce such Covenant through specific performance, temporary restraining order, preliminary or permanent injunction, and other equitable relief. Such remedies shall be cumulative and in addition to any other remedies ITPI may have, at law or in equity. 13. Notice of Subsequent Employment; Etc. Norcross agrees that she shall, during the one (l) year period following the termination of her employment with ITPI, give written notice to ITPI of the names and addresses of each person, firm, corporation or other entity by whom she is employed or for whom she acts as director, agent, representative, member, associate or consultant. Norcross further agrees that if at any time during such one (1) year period she conducts business on her own account, or through a proprietary interest in any business, firm, partnership or other entity, or as contractor, or owns any stock in a corporation, Norcross shall give written notice to ITPI of the name, address and nature of any such business. 14. Return of ITPI Property; Assignment of Inventions. a. Return of Property. Upon the termination of Norcross's employment with ITPI for any reason, Norcross shall leave with or return to ITPI all personal property belonging to ITPI ("ITPI Property") that is in Norcross's possession or control as of the date of such termination of employment, including, without limitation, all records, papers, drawings, notebooks, specifications, marketing materials, software, reports, proposals, equipment, or any other device, document or possession, however obtained, whether or not such ITPI Property contains confidential or proprietary information of ITPI as described in Section 8c hereof. b. Assignment of Inventions. If at any time or times during Norcross's employment, Norcross shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called "Developments") that (a) relates to the business of ITPI or any of the products or services being developed, manufactured or sold by ITPI or that may be used in relation therewith, (b) results from tasks assigned her by ITPI or (c) results from the use of premises or personal property (whether tangible or intangible) owned, leased, or contracted for by ITPI, such Developments and the benefits thereof shall immediately become the sole and absolute property of ITPI and its assigns, and Norcross shall promptly disclose to ITPI (or any persons designated by it) each such Development and hereby assigns any rights Norcross may have or acquire in the Developments and benefits and/or rights resulting therefrom to ITPI and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto with all necessary plans and models) to ITPI. Upon disclosure of each Development to ITPI, Norcross will, during her employment and at any time thereafter, at the request and expense of ITPI, sign, execute, make and do all such deeds, documents, acts and things as ITPI and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of ITPI alone (unless ITPI otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. In the event ITPI is unable, after reasonable effort, to secure Norcross's signature on any letters patent, copyright or other analogous protection relating to a Development, whether because of Norcross's physical or mental incapacity or for any other reason, Norcross hereby irrevocably designates and appoints ITPI and its duly authorized officers and agents as Norcross's agents and attorneys-in-fact, to act for and in behalf of Norcross and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other analogous protection thereon with the same legal force and effect as if executed by Norcross. 15. Survival. The provisions of Sections 11, 12, 13 and 14 hereof shall survive the termination of this Agreement, regardless of the manner or cause of such termination. 16. Effect of Agreement. This Agreement sets forth the final and complete Agreement of the parties. It shall not be assigned by Norcross and may not be modified except by way of a writing executed by both parties. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their successors and assigns. 17. Governing Law. The provisions of this Agreement and any disputes arising hereunder shall be governed by and construed in accordance with the laws of the State of Delaware. 18. Other Agreements. Any earlier employment or stock option agreements between Norcross and ITPI are hereby terminated and shall be no further effect after the effective date hereof. [The next page is the Signature Page.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their seals affixed hereto as of the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein ----------------------- Name: Daniel J. Klein Title: CEO /s/ Christine E. Norcross (SEAL) --------------------- Christine E. Norcross EX-10.15 24 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of May 30, 1997, between IT PARTNERS, INC. , a Delaware corporation ("ITPI") and JAMIE E. BLECH ("Blech"). WHEREAS, ITPI desires to employ Blech and Blech desires to accept such employment on the terms and conditions hereinafter set forth; and WHEREAS, the parties hereby acknowledge that the goodwill, continued patronage, names, addresses and specific business requirements of ITPI's clients and customers, and the designs, procedures, systems, strategies, business methods and know-how of ITPI, having been acquired through ITPI's efforts and the expenditure of considerable time and money, are among the principal assets of ITPI; and WHEREAS, the parties hereby acknowledge that as a result of the position(s) in which Blech will be employed, Blech will develop special skills and knowledge peculiar to ITPI's business, whereby he will become, through his employment with ITPI, acquainted with the identities of the clients and customers of ITPI, and will acquire access to the techniques of ITPI in carrying on its business as well as other confidential and proprietary information; and WHEREAS, the parties hereto acknowledge that the Covenants set forth in Section 8 of this Agreement are necessary for the reasonable and proper protection of ITPI's confidential and proprietary information (as defined herein), customer relationships, and the goodwill of ITPI's business, and that such Covenants constitute a material portion of the consideration for Blech's employment hereunder. NOW, THEREFORE, in consideration of the premises and mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Term. ITPI agrees to employ Blech, and Blech agrees to be employed, as Vice Chairman and/or Chief Operating Officer as determined by ITPI's Board of Directors (the "Board") from time to time for an initial term of five (5) years commencing June 1, 1997 and ending May 30, 2002 (the "Initial Term"), unless such employment is sooner terminated as provided herein. In such capacity, Blech shall perform such duties and have such responsibilities as are incident and customary to such offices, and shall have such powers and perform such other duties and responsibilities as may be assigned to him by the Board. During term hereof, Blech shall devote his full time, attention, skill and energy to the performance of his duties under this Agreement, and he shall comply with all reasonable professional requests of the Company. 2. Compensation. 2.1 Base Salary. In consideration of Blech's services hereunder, ITPI shall, beginning with the pay period commencing 6/1/1997, pay Blech a minimum base salary of One Hundred Twenty Thousand and 00/100 Dollars ($120,000) per annum, payable in equal monthly installments in accordance with ITPI's normal payroll practices. Such base salary will be reviewed annually, and may be increased (but not decreased) by ITPI's Board, or its Executive Committee in its sole discretion. 2.2. Bonus Compensation. In addition, Blech shall be eligible for an annual performance bonus of up to one hundred percent (100%) of Blech's base salary, based upon the achievement of certain defined annual performance goals consistent with the Company's 5-year operating plan established by the Board (including, without limitation, "threshold" goals, "plan" goals and "override" goals), in consultation with ITPI management, during the term hereof. a. Achievement by the Company of its "threshold" performance goal for a given year shall make Blech eligible to receive a bonus payment equal to twenty percent (20%) of his annual base salary. b. Achievement by the Company of its "plan" performance goal for a given year shall make Blech eligible to receive a bonus payment equal to sixty percent (60%) of his annual base salary. c. Achievement by the Company of its "override" performance goal for a given year shall make Blech eligible to receive a bonus payment equal to one hundred percent (100%) of his annual base salary. d. ITPI may, in its sole discretion, pay a bonus to Blech over and above any bonuses determined and paid to Blech in accordance with this Section. 3. Fringe Benefits. 3.1. During the term of this Agreement, Blech shall be entitled to participate in any and all fringe benefit plans, programs and practices which shall from time to time be sponsored by ITPI for the benefit of its executive employees, and shall be furnished with other services and perquisites appropriate to his position. 3.2. Without limiting the generality of the foregoing, Blech shall be entitled to the following benefits (regardless of whether such benefits are provided to other executives): a. Comprehensive medical insurance for Blech, his spouse, and his dependent children with no deductibles or co-insurance. b. Dental and vision insurance for Blech, his spouse, and his dependent children with no deductibles or co-insurance. c. Group term life insurance with death benefits of not less than $1,000,000.00. d. Long-term disability insurance paying disability benefits of at least 70% of Blech's salary upon the termination of Blech's employment by reason of disability. e. Accidental death and dismemberment insurance benefits of not less than $1,000,000.00. f. Annual physical examinations. g. Financial planning services with a value of up to $2,500.00 per year during the term hereof. 4. Vacation and Sick Leave. Blech shall be entitled to a total of four (4) weeks of vacation each year during the term hereof. Unused vacation shall not accumulate from year to year. Blech may take his vacation at such time or times as shall not unreasonably interfere with the performance of his duties under this Agreement. Blech shall be entitled to paid sick leave and holidays in accordance with ITPI's announced policy for executive employees as in effect from time to time. 5. Reimbursement of Expenses. Blech is authorized to incur reasonable expenses in connection with the business of ITPI including expenses for travel and similar items. ITPI will reimburse Blech for all previously approved reasonable expenses upon itemized account of expenditures. 6. Illness or Disability. Blech shall receive full compensation for any period of illness or disability during the term of this Agreement until such time as he receives benefits under the long term disability insurance coverage referred to in Section 4, supra; provided, however, that such interim period of compensation for illness or disability shall not exceed six (6) months. Notwithstanding the foregoing, ITPI shall have the right to terminate this Agreement without further obligation to Blech if such illness or disability shall be of such a character as totally to disable Blech from rendering any services to ITPI for a period of more than six (6) consecutive months on giving at least thirty (30) days' written notice of intention to do so. 7. Termination of Employment. Blech's employment hereunder is employment at will, and either ITPI or Blech may terminate this Agreement and Blech's employment at any time, with or without cause. If ITPI terminates the Agreement other than (i) for Cause (defined below) or (ii) due to Blech's Disability as described in Section 6 hereof, Blech shall be entitled to receive, as his exclusive remedy for such termination, the payment of his then-current base salary for the remainder of the Term hereof (the "Severance Benefit"). Such Severance Benefit shall be payable to Blech in equal monthly installments consistent with ITPI's standard payroll practices, the first of such installments to be due within thirty (30) days after a qualifying termination hereof. For purposes of this Agreement, "Cause" shall mean drug or alcohol abuse, conviction of a felony or crime involving moral turpitude, a material breach of this Agreement, or any willful or grossly negligent act or omission by Blech having a material adverse effect on the business of ITPI. 8. Restrictive Covenants. a. Noncompetition. Blech agrees that during his employment, and for a period of two (2) years after the later of termination of this Agreement and termination of his employment with ITPI (the "Protected Period"), he will not: (a) engage in, manage, operate, control or supervise, or participate in the management, operation, control or supervision of, any business or entity that provides computer programming or consulting services, or any other products or services competitive with those currently provided by ITPI or those ITPI is providing as of the date of termination of Blech's employment with ITPI ("Competitive Activity"); or (b) have any ownership or financial interest, directly or indirectly, in any entity that engages in Competitive Activity, including, without limitation, as an individual, partner, shareholder (other than as a shareholder of a publicly owned corporation in which Blech owns less than 2% of the outstanding shares of such corporation), officer, director, employee, member, associate, principal, agent, representative or consultant, and shall not in any other manner, directly or indirectly, compete to any extent with such business of ITPI. Notwithstanding the foregoing, if the Agreement is terminated by ITPI and such termination is without Cause, as defined herein, Blech shall be bound by the terms of this subsection 8a only for the shorter of (i) two (2) years following such termination or (ii) the period of time following such termination during which ITPI, at ITPI's sole discretion, continues to pay Blech's then-current base salary. b. Nonsolicitation. During Blech's employment with ITPI, and during the Protected Period, Blech agrees not to solicit or conduct business, without ITPI's consent, with any client or customer of ITPI (past or present), whether or not ITPI is doing work for such client or customer as of the date of termination of Blech's employment with ITPI, as well as any prospective client or customer of ITPI, or to contact, solicit, interfere with or attempt to entice in any form, fashion or manner any employee of ITPI for the purpose of inducing that employee to terminate his/her employment with ITPI or act in any way that would be contrary to the best interests of ITPI. c. Nondisclosure. During and after Blech's employment with ITPI, Blech agrees not to disclose, or to knowingly allow any other employee to disclose, to any other person or business entity, or use for personal profit or gain, any confidential or proprietary information of ITPI, regardless of whether the same shall be or may have been originated, discovered or invented by Blech or by Blech in conjunction with others. For purposes of this Agreement, the term "confidential or proprietary information" shall include, without limitation: the names, addresses and telephone numbers of past, present and prospective clients or customers of ITPI, as well as products, designs, business plans, proposed business development, marketing strategies, customers requirements, contractual provisions, employee capabilities, proposed marketing initiatives, pricing methods, company earning, computer software and reporting systems, and the procedures, systems and business methods of ITPI. d. Geographic Scope of Restrictive Covenants. The geographic area in which Blech shall not engage in any of the prohibited activities listed in subsections 8a and 8b hereof shall be limited to the continental United States. 9. Remedies for Breach. Blech hereby acknowledges and agrees that a violation of any of the covenants set forth in Section 8 hereof (the "Covenants") would result in immediate and irreparable harm to ITPI, and that ITPI's remedies at law, including, without limitation, the award of money damages, would be inadequate relief to ITPI for any such violation. Therefore, any violation or threatened violation by Blech of the Covenants shall give ITPI the right to enforce such Covenants through specific performance, temporary restraining order, preliminary or permanent injunction, and other equitable relief. Such remedies shall be cumulative and in addition to any other remedies ITPI may have, at law or in equity. 10. Notice of Subsequent Employment; Etc. Blech agrees that he shall, during the two (2) year period following the termination of his employment with ITPI, give written notice to ITPI of the names and addresses of each person, firm, corporation or other entity by whom he is employed or for whom he acts as director, agent, representative, member, associate or consultant. Blech further agrees that if at any time during such two (2) year period he conducts business on his own account, or through a proprietary interest in any business, firm, partnership or other entity, or as contractor, or owns any stock in a corporation, Blech shall give written notice to ITPI of the name, address and nature of any such business. 11. Return of ITPI Property; Assignment of Inventions. a. Return of Property. Upon the termination of Blech's employment with ITPI for any reason, Blech shall leave with or return to ITPI all personal property belonging to ITPI ("ITPI Property") that is in Blech's possession or control as of the date of such termination of employment, including, without limitation, all records, papers, drawings, notebooks, specifications, marketing materials, software, reports, proposals, equipment, or any other device, document or possession, however obtained, whether or not such ITPI Property contains confidential or proprietary information of ITPI as described in Section 8c hereof. b. Assignment of Inventions. If at any time or times during Blech's employment, Blech shall (either alone or with others) make, conceive, discover or reduce to practice any invention, modification, discovery, design, development, improvement, process, software program, work of authorship, documentation, formula, data, technique, know-how, secret or intellectual property right whatsoever or any interest therein (whether or not patentable or registrable under copyright or similar statutes or subject to analogous protection) (herein called "Developments") that (a) relates to the business of ITPI or any of the products or services being developed, manufactured or sold by ITPI or that may be used in relation therewith, (b) results from tasks assigned him by ITPI or (c) results from the use of premises or personal property (whether tangible or intangible) owned, leased or contracted for by ITPI, such Developments and the benefits thereof shall immediately become the sole and absolute property of ITPI and its assigns, and Blech shall promptly disclose to ITPI (or any persons designated by it) each such Development and hereby assigns any rights Blech may have or acquire in the Developments and benefits and/or rights resulting therefrom to ITPI and its assigns without further compensation and shall communicate, without cost or delay, and without publishing the same, all available information relating thereto (with all necessary plans and models) to ITPI. Upon disclosure of each Development to ITPI, Blech will, during his employment and at any time thereafter, at the request and expense of ITPI, sign, execute, make and do all such deeds, documents, acts and things as ITPI and its duly authorized agents may reasonably require: (i) to apply for, obtain and vest in the name of ITPI alone (unless ITPI otherwise directs) letters patent, copyrights or other analogous protection in any country throughout the world and when so obtained or vested to renew and restore the same; and (ii) to defend any opposition proceedings in respect of such applications and any opposition proceedings or petitions or applications for revocation of such letters patent, copyright or other analogous protection. In the event ITPI is unable, after reasonable effort, to secure Blech's signature on any letters patent, copyright or other analogous protection relating to a Development, whether because of Blech's physical or mental incapacity or for any other reason, Blech hereby irrevocably designates and appoints ITPI and its duly authorized officers and agents as Blech's agents and attorneys-in-fact, to act for and in behalf of Blech and stead to execute and file any such application or applications and to do all other lawfully permitted acts to further the prosecution and issuance of letters patent, copyright or other analogous protection thereon with the same legal force and effect as if executed by Blech. 12. Survival. The provisions of Sections 8, 9, 10 and 11 hereof shall survive the termination of this Agreement, regardless of the manner or cause of such termination. 13. Effect of Agreement. This Agreement sets forth the final and complete Agreement of the parties. It shall not be assigned by Blech and may not be modified except by way of a writing executed by both parties. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their successors and assigns. 14. Governing Law. The provisions of this Agreement and any disputes arising hereunder shall be governed by and construed in accordance with the laws of the State of Delaware. [The next page is the Signature Page.] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and their seals affixed hereto as of the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein ----------------------- Name: Daniel J. Klein Title: President /s/ Jamie E. Blech (SEAL) ---------------------- Jamie E. Blech EX-10.16 25 CORBETT NOTE PROMISSORY NOTE $2,226,000 Silver Spring, Maryland June 30, 1997 FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to CHRISTOPHER CORBETT (the "Payee") the principal sum of Two Million Two Hundred Twenty-Six Thousand Dollars ($2,226,000), together with interest at the rate of eight percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, (2) the closing date of any public offering of the common stock of the Maker, or (3) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Business Combination Agreement between the Maker and the Payee, dated June 30, 1997, pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc., by virtue of and pursuant to that certain Loan and Security Agreement by and among the Maker, the Lenders (the "Lenders") as party thereto and Creditanstalt Corporate Finance, Inc., as Agent for the Lenders (the "Agent"), dated May 30, 1997 (the "Loan Agreement"), as well as that certain Subordination Agreement executed by the Payee on even date in favor of the Lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of five percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such payment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof and lastly to the principal amount outstanding hereunder. If this Note is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed fifteen percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by the Maker and contained in that certain Business Combination Agreement between the Maker and the Payee, dated June 30, 1997 or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. If following the occurrence and during the continuance of an Event of Default, Maker desires to sell all or substantially all of the assets of A-COM, Inc. (other than as a part of any sale of substantially all of the assets of the Maker and the subsidiaries generally), Payee shall have the right of first refusal to purchase such assets on terms and conditions identical to those being offered to Maker for a period of thirty (30) days after written notice; provided however that any such sale shall be subject to the prior written consent of the Agent. If the Payee exercises its right of first refusal and purchases such assets, the Maker shall credit the amount due under the Note towards the purchase price of the assets of A-COM, Inc., except to the extent that the Agent and the Lenders require that the purchase price be applied to the Maker's outstanding obligations under the Loan Agreement. The rights and remedies set forth in this Note may be exercised by the Payee during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein (SEAL) ------------------------------ Daniel J. Klein, President EX-10.17 26 PROMISSORY NOTE Stanton L. Call $2,876,206.00 Columbia, Maryland 5/13, 1998 --------------- FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to Stanton L. Call (the "Payee") the principal sum of TWO MILLION EIGHT HUNDRED SEVENTY SIX THOUSAND TWO HUNDRED SIX AND 00/100 DOLLARS ($2,876,206.00), together with interest at the rate of eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly commencing August 15, 1998, and payable thereafter on the fifteenth of November, February and May, respectively, through the Maturity Date. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, or (2) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Asset Purchase Agreement between the Maker and the Payee, dated 5/13,1998 (the "Asset Purchase Agreement"), pursuant to which this Note has been issued. The principal amount of this Note will be subject to cancellation and amendment pursuant to Section 2.1(iii)(d) of the Asset Purchase Agreement. If this Note is canceled or amended in accordance with the Asset Purchase Agreement, the Payee, upon demand of Maker, shall within seven (7) days of such demand return this Note to Maker for cancellation and return any excess payment made on this Note to the Maker. Upon determination of the NTM EBITDA, as such term is defined in the Asset Purchase Agreement, this Note shall be convertible into Common Shares of ITP at a conversion price of $5.70 per share. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Amended and Restated Loan and Security Agreement by and between the Maker and the Lenders named therein, dated March 31, 1998, as well as that certain Subordination Agreement executed by the Payee on even date in favor of the Lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time. without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this Note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by the Maker and contained in the Asset Purchase Agreement or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written IT PARTNERS, INC. By: /s/ Jamie E. Blech ---------------------------- Title: President ------------------------- EX-10.18 27 PROMISSORY NOTE $102,036.50 Columbia, Maryland July 28, 1997 FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to Stanley Nice (the "Payee") the principal sum of One Hundred Two Thousand Thirty-Six Dollars and Fifty Cents ($102,036.50), together with interest at the rate of Eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, (2) the time immediately prior to the Maker commencing a public offering of its common stock, or (3) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Business Combination Agreement between the Maker, the Payee and the other parties thereto, dated May 22, 1997 (the "Merger Agreement"), pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Loan and Security Agreement by and between the Maker and Creditanstalt Corporate Finance, Inc., dated May 30, 1997 (as amended from time to time), as well as that certain Subordination Agreement executed by the Payee on even date in favor of the lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this Note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the Principal amount hereof and lastly to the Principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent ( 15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a material breach of any of the covenants, warranties or representations made by the Maker and contained in the Merger Agreement. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS. INC. By: /s/ Daniel J. Klein (SEAL) -------------------------- Daniel J. Klein, President EX-10.19 28 PROMISSORY NOTE $102,036.50 Columbia, Maryland July 28, 1997 FOR VALUE RECEIVED, the undersigned, IT PARTNERS, INC., a Delaware corporation (the "Maker") promises to pay to John Clement (the "Payee") the principal sum of One Hundred Two Thousand Thirty-Six Dollars and Fifty Cents ($102,036.50), together with. interest at the rate of Eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, (2) the time immediately prior to the Maker commencing a public offering of its common stock, or (3) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Business Combination Agreement between the Maker, the Payee and the other parties thereto, dated May 22, 1997 (the "Merger Agreement"), pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Loan and Security Agreement by and between the Maker and Creditanstalt Corporate Finance, Inc., dated May 30, 1997 (as amended from time to time), as well as that certain Subordination Agreement executed by the Payee on even date in favor of the Lenders described therein. In the event Maker shall fail to make any payment within ten (10) days after its due date, the Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to the Maker in writing at any time or from time to time. The Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse the Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this Note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, the Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of the Maker to pay any obligation hereunder within ten (10) days after the due date thereof, or (2) a material breach of any of the covenants, warranties or representations made by the Maker and contained in the Merger Agreement. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS, INC. By:/s/ Daniel J. Klein (SEAL) ------------------------- Daniel J. Klein, President EX-10.20 29 PROMISSORY NOTE $472,409.90 Silver Spring, Maryland May 27, 1997 FOR VALUE RECEIVED, the undersigned IT Partners, Inc., a Delaware corporation (the "Maker") promises to pay to STANLEY NICE (the "Payee") the principal sum of FOUR HUNDRED SEVENTY-TWO THOUSAND FOUR HUNDRED NINE DOLLARS AND NINETY CENTS ($472,409.90), together with interest at the rate of Eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, (2) the time immediately prior to the Maker commencing a public offering of its stock or (3) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Business Combination Agreement between the Maker and the Payee, dated May 27, 1997, pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Loan and Security Agreement by and between the Maker and Creditanstalt Corporate Finance, Inc., dated May 27, 1997, as well as that certain Subordination Agreement of even date executed by the Payee in favor of the lenders described therein. In the event Maker shall fail to make any payment within Ten (10) days after its due date, Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which it is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to Maker in writing at any time or from time to time. Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of Maker to pay any obligation hereunder within Ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by Maker and contained in that certain Business Combination Agreement between Maker and Payee, dated May 27, 1997 or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS. INC By: /s/ Daniel J. Klein,(SEAL) ------------------------- EX-10.21 30 PROMISSORY NOTE $432,998.90 Silver Spring, Maryland May 27, 1997 FOR VALUE RECEIVED, the undersigned IT Partners, Inc., a Delaware corporation (the "Maker") promises to pay to JOHN CLEMENT (the "Payee") the principal sum of FOUR HUNDRED THIRTY-TWO THOUSAND NINE HUNDRED NINETY EIGHT DOLLARS AND NINETY CENTS ($432,998.90), together with interest at the rate of Eight Percent (8%) per annum accruing on the unpaid principal balance in the following manner: Simple interest on the unpaid principal shall be paid to the Payee quarterly. The principal and any remaining accrued interest shall be due in its entirety, and this Note shall mature, upon the earlier of (1) five years from the date of this Note, (2) the time immediately prior to the Maker commencing a public offering of its stock, or (3) the closing date of (a) any sale of all or substantially all of the Maker's stock or assets to an entity that is not an Affiliate of the Maker, or (b) any transaction in which the Maker is merged out of existence and into an entity that is not an Affiliate of the Maker. "Affiliate" shall have the meaning set forth in that certain Business Combination Agreement between the Maker and the Payee, dated May 27, 1997, pursuant to which this Note has been issued. This Note shall be at all times subordinate to any security interests, liens, rights, privileges and entitlements held by Creditanstalt Corporate Finance, Inc. by virtue of and pursuant to that certain Loan and Security Agreement by and between the Maker and Creditanstalt Corporate Finance, Inc., dated May 27, 1997, as well as that certain Subordination Agreement of even date executed by the Payee in favor of the lenders described therein. In the event Maker shall fail to make any payment within Ten (10) days after its due date, Maker shall pay a late charge of Five Percent (5%) of the amount not paid in a timely manner, without written notice or additional demand therefor. Any such late charge shall be payable with the installment on which is imposed. All payments required under the terms of the Note shall be paid in lawful money of the United States of America at such place as the holder of this Note shall designate to Maker in writing at any time or from time to time. Maker may prepay the principal amount outstanding, in full or in part, at any time, without premium or penalty. However, any such prepayment shall be applied to installments (or portions thereof) in reverse order of their due dates, so that any such prepayment shall not excuse Maker from paying any installment in full as it becomes due and payable until such time as the principal is paid in full. All payments made pursuant to this note shall be applied, first, to any late fees and penalties hereunder, next, to all accrued and outstanding interest on the principal amount hereof, and lastly to the principal amount outstanding hereunder. If this Note rightfully is forwarded to an attorney for collection, Maker shall pay on demand all costs and expenses of collection, including a reasonable fee for attorneys not to exceed Fifteen Percent (15%) of the then outstanding principal balance hereunder. Any of the following events ("Events of Default") shall constitute a default under the terms of this Note: (1) failure of Maker to pay any obligation hereunder within Ten (10) days after the due date thereof, or (2) a breach of any of the covenants, warranties or representations made by Maker and contained in that certain Business Combination Agreement between Maker and Payee, dated May 27, 1997 or under any agreement executed pursuant thereto. If an Event of Default shall occur, the Maker shall be deemed in default of its obligations under this Note, and the holder of this Note may declare the entire unpaid principal balance of this Note, together with any accrued and unpaid interest, and any unpaid late charges imposed thereon, immediately due and payable. The Maker shall in any event have the right to cure the default for up to thirty (30) days after such event of default. The Maker hereby waives and releases, to the extent permitted by law, all errors and all rights of exemption, appeal, stay of execution, inquisition and extension upon any levy on real estate or personal property to which the Maker may otherwise be entitled under any law now enforced or which may hereafter be passed. The rights and remedies set forth in this Note may be exercised by the holder of this Note during any default by the Maker, regardless of any prior forbearance, and are in addition to any other rights or remedies provided by law or in equity. The Maker hereby waives presentment for payment, demand for payment, protest, notice of protest and of dishonor, and any and all demands and notices that might otherwise be required by law. This Note shall be deemed to be made in and shall be governed by the laws of the State of Maryland. The terms of any documents referred to herein are incorporated herein by reference as though fully set forth herein verbatim. IN WITNESS WHEREOF, the Maker has executed this Note, under seal, the day and year first above written. IT PARTNERS, INC. By: /s/ Daniel J. Klein (SEAL) --------------------------- Daniel J. Klein, President -----END PRIVACY-ENHANCED MESSAGE-----