MEMBERSHIP INTEREST PURCHASE AGREEMENT

Exhibit 2.1

MEMBERSHIP INTEREST
PURCHASE AGREEMENT

by and between

ENTERPRISE FINANCIAL SERVICES CORP.,

MILLENNIUM HOLDING COMPANY, INC.,

MILLENNIUM BROKERAGE GROUP, LLC,

WILLIAM L. ZELENIK,

JOHN W. BOHLMAN, JR.,

JOHN R. GILLENWATER,

JAMES L. LAUGHLIN II,

DENNIS WALL,

STEVEN T. WELD,

JOHN A. WHITE,

ROBERT R. WILLIAMS, and

MILLENNIUM HOLDINGS, LLC

 

Dated  October 13, 2005

 

TABLE OF CONTENTS

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

           THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (the “ Agreement ”) is made this 13 ^th day of October, 2005 by and among ENTERPRISE FINANCIAL SERVICES CORP., a Delaware corporation (“EFSC”), MILLENNIUM HOLDING COMPANY, INC., a Missouri corporation (“ Acquisition Sub” and collectively with EFSC, “ Purchaser ”), MILLENNIUM BROKERAGE GROUP, LLC, a Tennessee limited liability company (the “ Company ”), MILLENNIUM HOLDINGS, LLC, a Tennessee limited liability company (“ Diamond ”), and the members of the Company that have executed the signature page of this Agreement (collectively, the “Sellers”). 

RECITALS

           A.           The Company is engaged in the life insurance brokerage business, representing and marketing the products of various insurance carriers (collectively, the “ Business ”).

           B.           The Sellers own all of the Membership Interests of the Company.

          C.           The Company owns a portion of the issued and outstanding common stock of Millennium Distributors, Inc., a Tennessee corporation (“ MDI ”).

           D.           On the terms and subject to the conditions set forth in this Agreement, Purchaser wishes to acquire from the Sellers and the Sellers wish to sell to the Purchaser all of the Membership Interests of the Company through a series of transactions as more particularly described in this Agreement.

           NOW, THEREFORE , in consideration of the foregoing, the mutual covenants herein contained and other good and valuable consideration (the receipt, adequacy and sufficiency of which are hereby acknowledged by the parties by their execution hereof) and intending to be legally bound, the parties hereto hereby agree as follows:

ARTICLE 1
DEFINITIONS; CONSTRUCTION

          1.01      Definitions .  For purposes of this Agreement, unless the context clearly indicates otherwise, the following capitalized terms have the meanings specified or referred to in this Section 1.01 :

                     “ 754 Election Form ” has the meaning set forth in Section 2.06(a)(xiv) .

                    “ Acquisition Sub ” has the meaning set forth in the introductory paragraph.

                    “ Actual 2006/2007 Weighted Average Pre-Tax Income ” means:

                              (a)          the sum of (i) the product of the Pre-Tax Income for the 2006 calendar year multiplied by two; plus (ii) the product of the Pre-Tax Income for the 2007 calendar year multiplied by three; divided by

                               (b)          five.

 

                    “ Actual 2008/2009 Weighted Average Pre-Tax Income ” means:

                              (a)          the sum of (i) the product of the Pre-Tax Income for the 2008 calendar year multiplied by two; plus (ii) the product of the Pre-Tax Income for the 2009 calendar year multiplied by three; divided by

                              (b)          five.

                    “ Affiliate ” means:  (i) any Person which, directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, the party for whom an affiliate is being determined; (ii) any Person who is a director, Governor, manager or officer of any Person described in clause (i) above; or (iii) any partner (general or limited), grantor, trustee, beneficiary, spouse, child (including an adult child) or sibling of the party for whom an affiliate is being determined.

                    “ Agreed Accounting Procedures ” has the meaning set forth in Section 2.04(b) .

                    “ Agreement ” has the meaning set forth in the introductory paragraph.

                    “ Aggregate Purchase Price ” means the sum of the First Installment Price, the Second Installment Price and the Third Installment Price.

                    “ Audited 2004 Financial Statements ” has the meaning set forth in Section 4.07(a) .

                    “ Audited Closing Balance Sheet ” has the meaning set forth in Section 2.04(a) .

                    “ Authorized Action ” has the meaning set forth in Section 6.03(c) .

                     “ Breach ” means any breach of any representation or warranty or any breach of, or failure to perform or comply with, any covenant or obligation, in or of this Agreement or any other Contract.

                     “ Business ” has the meaning set forth in the Recitals.

                     “ Business Day ” means any day other than a Saturday, Sunday or any other day on which banks are permitted by Law to be closed in the City of St. Louis, Missouri or the City of Nashville, Tennessee.

                    “ Claimant ” has the meaning set forth in Section 9.05(a) .

                     “ Closing Indebtedness ” has the meaning set forth in Section 2.03 .

                     “ Closing Value ” means the average closing price of EFSC’s common stock on any public exchange where such common stock is listed for the thirty (30) trading days prior to the date of determination, which shall be three (3) Business Days prior to the First Installment Closing Date, the Second Installment Closing Date and the Third Installment Closing Date as applicable.

                     “ COBRA ” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code §4980B and any similar state law.

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                     “ Code ” means the Internal Revenue Code of 1986, as amended.

                     “ Company ” has the meaning set forth in the introductory paragraph to this Agreement.

                     “ Company Contracts ” has the meaning set forth in Section 4.12 .

                     “ Company’s Articles ” has the meaning set forth in Section 4.01 .

                     “ Company’s Operating Agreement ” has the meaning set forth in Section 4.01 .

                     “ Confidentiality Agreement ” has the meaning set forth in Section 6.01(a) .

                     “ Consent ” means any approval, consent, ratification, waiver, novation or other authorization.

                     “ Contract ” means any agreement, contract, lease, license, consensual obligation, promise, bid, proposal or undertaking that the Company currently has or at the First Installment Closing will have in effect that has not otherwise expired or been terminated (whether written or oral, express or implied and whether in the name of the Company or in the name of a Member for the benefit of the Company).

                     “ Control ” means, with respect to any Person, the power, direct or indirect, to (i) vote 25% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of such Person; or (ii) direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise and either alone or in conjunction with others.

                     “ CPA Firm ” has the meaning set forth in Section 2.04(a) .

                     “ Critical Representations ” has the meaning set forth in Section 9.01(a) .

                     “ Damages ” has the meaning set forth in Section 9.02(a) .

                     “ Diamond ” has the meaning set forth in the introductory paragraph to this Agreement.

                     “ Diamond Articles ” has the meaning set forth in Section 4.01 .

                     “ Diamond Operating Agreement ” has the meaning set forth in Section 4.01 .

                     “ Document Escrow Letter ” has the meaning set forth in Section 2.06(a)(vi) .

                     “ EFSC ” has the meaning set forth in the introductory paragraph.

                    “ Employee Benefit Plan ” means any “employee benefit plan” (as such term is defined in ERISA §3(3)) and each other formal, informal or written employee benefit plan, program, policy, contract or arrangement providing for payment, reimbursement or benefits to current or former employees (or their beneficiaries or dependents) of the Company (including any bonus plan, plan for deferred compensation, retirement, severance, sick leave, employee health or other welfare benefit plan or other arrangement, change of control bonuses), maintained, sponsored, or contributed to by the Company during the past three years, or with respect to which the Company has any Liability or potential Liability.

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                     “ Employee Pension Benefit Plan ” has the meaning set forth in ERISA §3(2).

                     “ Employee Welfare Benefit Plan ” has the meaning set forth in ERISA §3(1).

                     “ Employment Agreements ” has the meaning set forth in Section 2.06(a)(ii) .

                     “ Encumbrance ” means any pledge, hypothecation, mortgage, deed of trust, assignment, restriction on transfer, lease, lien (statutory or otherwise), security interest or similar arrangement.

                     “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

                     “ ERISA Affiliate ” means each entity which is treated as a single employer with the Company for purposes of Code §414.

                     “ Estimated Closing Balance Sheet ” has the meaning set forth in Section 2.03 .

                     “ Estimated Net Working Capital ” has the meaning set forth in Section 2.03 .

                     “ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

                     “ Final Net Working Capital ” has the meaning set forth in Section 2.04(a) .

                     “ Financial Statements ” has the meaning set forth in Section 4.07(a) .

                     “ First Installment Cash Consideration ” has the meaning set forth in Section 2.02 .

                     “ First Installment Closing ” has the meaning set forth in Section 2.05 .

                     “ First Installment Closing Date ” has the meaning set forth in Section 2.05 .

                     “ First Installment Interests ” has the meaning set forth in Section 2.01 .

                     “ First Installment Price ” has the meaning set forth in Section 2.02 .

                     “ First Installment Stock Consideration ” has the meaning set forth in Section 2.02 .

                     “ Fiscal Year ” means a fiscal year of the Company, which ends on December 31.

                     “ Funded Debt ” of a Person means any of the following: (i) Liabilities for borrowed money or issued in substitution or exchange therefor, (ii) Liabilities evidenced by any note, bond, debenture or other debt security, and (iii) Liabilities under capitalized or “synthetic leases,” including any lease which is required to be reported as a capital lease under GAAP, in each case with respect to which such Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, or with respect to which obligations such Person assures a creditor against loss.

                    “ GAAP ” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board, the American Institute of Certified Public Accountants, the Financial Accounting Standards Board, the Public Company Accounting Oversight Board or in such statements by such other entity as may be approved by a significant segment of the accounting profession.

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                     “ Governmental Authorization ” means any material permits, license, bonds, approvals certificates, registrations, accreditations, Consents or other authorizations issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law.

                     “ Governmental Approvals ” has the meaning set forth in Section 7.01(a)(iii) .

                     “ Governmental Body ” means any:  (i) nation, state, county, city, town, village, district or other jurisdiction of any nature; (ii) federal, state, local, municipal, foreign or other government; (iii) governmental or quasi-Governmental Body of any nature (including any governmental agency, branch, department, official, commission, board, bureau, instrumentality or entity and any court or other tribunal); (iv) military branch of the United States government or any other national government; (v) multi-national organization or body; or (vi) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, including without limitation the NASD.

                     “ Governor ” means a member of the Board of Governors of a limited liability company, as further defined in the Tennessee Act.

                     “ Income Tax ” means any federal, state, local, or foreign income Tax, including any interest, penalty, or addition thereto, whether disputed or not.

                     “ Income Tax Return ” means any Tax Return relating to Income Taxes, including any schedule or attachment thereto, and including any amendment thereof.

                     “ Indebtedness ” shall mean, at a particular time, without duplication, (i) any Liability for Funded Debt, (ii) any obligation for the deferred purchase price of property or services with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current Liabilities incurred in the Ordinary Course of Business), (iii) any commitment by which a Person assures a creditor against loss (including, without limitation, contingent reimbursement obligations with respect to letters of credit), (iv) any obligation guaranteed in any manner by a Person (including, without limitation, guarantees in the form of an agreement to repurchase or reimburse), (v) any obligation secured by an Encumbrance on a Person’s assets, other than a Permitted Encumbrance (vi) any Liability under any deferred compensation plan, severance plan, bonus plan, employment agreement, or other plan, agreement or arrangement with any Person, which Liability is payable or becomes due as a result of the transactions contemplated herein, (vii) any Liability of the Company for bonuses or profit-sharing payments which are due and owing but unpaid as of the First Installment Closing Date, and (viii) any fees, penalties, premiums or accrued and unpaid interest with respect to the foregoing (in the case of prepayments or otherwise). 

                    “ Intellectual Property ” means all of the following in any jurisdiction throughout the world:  (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (ii) all Internet domain names, trademarks, service marks, trade dress, slogans, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in

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connection therewith; (iii) all copyrightable works, all copyrights and all applications, registrations and renewals in connection therewith; (iv) all mask works and all applications, registrations and renewals in connection therewith; (v) all trade secrets and confidential information (including ideas, research and development, know-how, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, copyrightable works, and business and marketing plans and proposals), which in each case have value and which a reasonably prudent operator of the business of the Company would have maintained as a trade secret; (vi) all computer software; (vii) all other proprietary and/or intellectual property rights; and (viii) all copies and tangible embodiments thereof (in whatever form or medium).

                    “ Interim Balance Sheet ” has the meaning set forth in Section 4.07(a) .

                     “ Interim Financial Statements ” has the meaning set forth in Section 4.07(a) .

                     “ Key Employee ” has the meaning set forth in Section 2.06(a)(ii) .

                     “ Knowledge ”, “ known to ”, or similar terms, when used in this Agreement to qualify any representation or warranty, mean that (at the time the applicable representation or warranty is made or deemed made or repeated) (i) in the case of the Company and MDI, any of the Sellers or Kathy Ruskin, and (ii) in the case of Purchaser, the Chief Executive Officer or Chief Financial Officer has actual (and not imputed or constructive) knowledge of facts or circumstances affecting such representation or warranty assuming reasonable investigation and due inquiry.

                     “ Law ” means any laws, constitutions, statutes, rules, codes, regulations or ordinances of any federal, foreign, state or local Governmental Body including without limitation the rules of the NASD set forth in the NASD Manual.

                     “ Leased Real Property ” means all leasehold or subleasehold estates and other rights to use or occupy any land, buildings, structures, improvements, fixtures or other interest in real property held by the Company, MDI or any Member of the Company for use by the Company.

                     “ Liability ” means any liability or obligation (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including without limitation any liability for Taxes or deferred revenue.

                     “ Material Adverse Effect ” means, as to any entity, any change or effect that is materially adverse to the business, assets, Liabilities, properties, results of operations or condition (financial or otherwise) of such entity.

                     “ Maximum Aggregate Purchase Price ” means Thirty Six Million Dollars ($36,000,000.00) minus the Closing Indebtedness.

                     “ MDI ” has the meaning set forth in the Recitals.

                     “ MDI Articles ” has the meaning set forth in Section 4.01 .

                     “ MDI Bylaws ” has the meaning set forth in Section 4.01 .

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                     “ Membership Interests ” means all of the equity interests in the Company held by all of the Members consisting of all of the Members’ aggregate financial rights and governance rights, as more particularly described in the Tennessee Act and the Company’s Operating Agreement or the New Operating Agreement, as applicable.

                     “ Member(s) ” means the members of the Company.

                     “ NASD ” means the National Association of Securities Dealers.

                     “ Net Working Capital ” means, as of any given date, the Company’s (i) total current assets, including without limitation, cash, cash equivalents, notes receivables, inventory, and prepaid expenses and other current assets, minus (ii) total current Liabilities, including without limitation trade accounts payable and accrued expenses, determined in all cases in accordance with GAAP; provided that Net Working Capital shall exclude any current Liabilities which are included in the defined term Indebtedness.

                     “ New Operating Agreement ” has the meaning set forth in Section 2.06(a)(iii) .

                     “ Objection Notice ” has the meaning set forth in Section 2.04(b) .

                     “ Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

                     “ Party ” or “ Parties ” means a party or the parties to this Agreement.

                     “ Payoff Letters ” has the meaning set forth in Section 2.06(a)(x) .

                     “ Permitted Encumbrances ” means (i) Encumbrances for Taxes not yet due or the validity of which are being contested in good faith by appropriate proceedings and as to which reasonable reserves have been established on the Company’s financial statements in accordance with GAAP, (ii) purchase money Encumbrances securing obligations reflected on the Audited Closing Balance Sheet and Encumbrances securing rental payments under lease arrangements disclosed in Schedule 4.12 , and (iii) mechanic’s, materialmen’s and similar liens arising or incurred in the Ordinary Course of Business which are not yet due and payable and which would not, individually or in the aggregate, have a Material Adverse Effect.

                     “ Person ” means an individual, a sole proprietorship, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, any other entity or a Governmental Body.

                     “ Post-Closing Financial Statements ” has the meaning set forth in Section 3.04(a) .

                     “ Pre-Tax Income ” with respect to any calendar year, means the before Tax net income of the Company, determined in accordance with GAAP, consistently applied with the accounting principles used in the preparation of the Audited 2004 Financial Statements to the extent applicable; provided that no portion of the Company’s goodwill attributable to the purchase of Membership Interests pursuant to this Agreement will be amortized for this purpose; and provided further, that in no event shall any portion of any draw or distribution made to a Key Employee under the New Operating Agreement be included as an expense of the Company for purposes of calculating Pre-Tax Income for any calendar year.

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                     “ Prevailing Party ” has the meaning set forth in Section 10.14 .

                     “ Proceeding ” means any action, cause, charge, complaint, demand, claim, arbitration, audit, hearing, investigation, litigation, suit or other proceeding (whether civil, criminal, administrative or investigative) commenced, brought, conducted or heard by or before, or otherwise involving, any Governmental Body, the NASD or any arbitrator.

                     “ Purchaser ” has the meaning set forth in the introductory paragraph.

                     “ Purchaser Closing Documents ” has the meaning set forth in Section 5.02 .

                     “ Purchaser Indemnified Person ” has the meaning set forth in Section 9.02 .

                     “ Qualified Investment ” means any capital investment in the Company, excluding the Aggregate Purchase Price, made by Purchaser or its Affiliates, which is approved by the Company’s Board of Governors pursuant to Section 4.5 of the New Operating Agreement.

                     “ Restricted Purchaser Shares ” means shares of EFSC’s common stock, which will be subject to the Stock Restriction Agreements.

                     “ Schedule ” has the meaning set forth in the introductory paragraph to Article 4 .

                     “ SEC ” means the Securities and Exchange Commission.

                     “ Second CPA Firm ” has the meaning set forth in Section 3.04(b) .

                     “ Second Installment Cash Consideration ” has the meaning set forth in Section 3.02(d)(i) .

                     “ Second Installment Closing ” has the meaning set forth in Section 3.02(c) .

                     “ Second Installment Closing Date ” has the meaning set forth in Section 3.02(a) .

                     “ Second Installment Stock Consideration ” has the meaning set forth in Section 3.02(d)(ii) .

                     “ Second Installment Interests ” has the meaning set forth in Section 3.02(a) .

                     “ Second Installment Price ” has the meaning set forth in Section 3.02(b) .

                     “ Securities Act ” means the Securities Act of 1933, as amended.

                     “ Sellers’ Expenses ” means all of the fees, costs and expenses (including fees, costs and expenses of legal counsel, investment bankers, brokers and other representatives and consultants) of the Company incurred in connection with the preparation or negotiation of this Agreement, the performance of its obligations hereunder and the consummation of the transactions contemplated hereby.

                     “ Seller Closing Certificates ” has the meaning set forth in Section 2.06(a)(vi) .

                     “ Seller Party Closing Documents ” has the meaning set forth in Section 4.04 .

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                     “ Seller Representative ” has the meaning set forth in Section 6.03 .

                     “ Service Provider ” means any Governor, manager, officer or employee of the Company or MDI and any Member that provides services to the Company including without limitation Key Employees.

                     “ Stock Restriction Agreements ” has the meaning set forth in Section 2.06(a)(iv) .

                     “ Subsidiary ” means any entity with respect to which any Person (or a Subsidiary thereof) of which (i) if a corporation, a majority of the total voting power of shares of stock entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a partnership, limited liability company, association or other business entity, either (A) a majority of the partnership, membership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof, or (B) such Person is a general partner, Governor, manager, managing member or managing director of such partnership, limited liability company, association or other entity.

                     “ Substantial Updated Disclosure ” has the meaning set forth in Section 6.01(d)(ii) .

                     “ Targeted 2006/2007 Weighted Average Pre-Tax Income ” means Eight Million Two Hundred Thousand Dollars ($8,200,000.00); provided that if prior to the Second Installment Closing Date, Purchaser makes one or more Qualified Investments, the Targeted 2006/2007 Weighted Average Pre-Tax Income will be increased by an amount sufficient to yield Purchaser a cumulative annual before-tax return of twenty three and 1/10 percent (23.1%) on all such Qualified Investments, based upon Purchaser’s pro rata share of such adjustment amount, determined in accordance with the New Operating Agreement.

                     “ Targeted 2008/2009 Weighted Average Pre-Tax Income ” means Twelve Million Nine Hundred Thousand Dollars ($12,900,000.00); provided that if prior to the Third Installment Closing Date, Purchaser makes one or more Qualified Investments, the Targeted 2008/2009 Weighted Average Pre-Tax Income will be increased by an amount sufficient to yield Purchaser a cumulative annual before-tax return of twenty three and 1/10 percent (23.1%) on all such Qualified Investments, based upon Purchaser’s pro rata share of such adjustment amount, determined in accordance with the New Operating Agreement.

                     “ Targeted Net Working Capital ” has the meaning set forth in Section 2.04(d)(i) .

                     “ Tax ” means any federal, state, local, county or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated or other Tax of any kind whatsoever, including any interest, penalty addition to tax or additional amount imposed by any Tax authority responsible for the imposition of any such tax (domestic or foreign), whether disputed or not.

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                     “ Tax Return ” means any return, declaration, report, claim for refund or information return or statement supplied or required to be supplied relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

                     “ Tennessee Act ” means the Tennessee Limited Liability Company Act, Chapters 201 through 248 of the Tennessee Code, in effect as of the date of this Agreement.

                     “ Third Installment Cash Consideration ” has the meaning set forth in Section 3.03(d)(i) .

                     “ Third Installment Closing ” has the meaning set forth in Section 3.03(c) .

                     “ Third Installment Closing Date ” has the meaning set forth in Section 3.03(a) .

                     “ Third Installment Stock Consideration ” has the meaning set forth in Section 3.03(d)(ii) .

                     “ Third Installment Interests ” has the meaning set forth in Section 3.03(a) .

                     “ Third Installment Price ” has the meaning set forth in Section 3.03(b) .

                    “ Third Party Approvals ” has the meaning set forth in Section 7.01(a)(ii) .

                     “ Third Parties ” has the meaning set forth in Section 7.01(a)(ix) .

          1.02      Construction .  Unless the context of this Agreement clearly requires otherwise:  (a) references to the plural include the singular and vice versa; (b) references to one gender include all genders; (c) ”including” is not limiting; (d) ”or” has the inclusive meaning represented by the phrase “and/or”; (e) the words “hereof”, “herein”, “hereby”, “hereunder” and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement; (f) section, clause, Exhibit and Schedule references are to this Agreement unless otherwise specified; (g) reference to any agreement (including this Agreement), document or instrument means such agreement, document or instrument as amended or modified and in effect as of the date hereof in accordance with the terms thereof and, if applicable, the terms hereof; and (h) general or specific references to any applicable Law means such applicable Law as amended, modified, codified or reenacted, in whole or in part, and in effect as of the date hereof, unless the effect thereof is to reduce, limit or otherwise prejudicially affect any obligation or any right, power or remedy hereunder, in which case such amendment, modification, codification or reenactment shall not, to the maximum extent permitted by applicable Law, form part of this Agreement and is to be disregarded for purposes of the construction and interpretation hereof.

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ARTICLE 2
SALE AND TRANSFER OF MEMBERSHIP INTERESTS;
FIRST INSTALLMENT CLOSING

          2.01           Purchase of First Installment Interests .  Pursuant to the terms and subject to the conditions of this Agreement, at the First Installment Closing, the Sellers will sell and transfer to Purchaser and Purchaser will purchase from the Sellers, on a pro rata basis, an aggregate portion of Sellers’ collective Membership Interests constituting sixty percent (60%) of all of the then issued and outstanding Membership Interests (the “ First Installment Interests ”), all as set forth on Exhibit A .

          2.02           First Installment Price .   The aggregate purchase price for the First Installment Interests (the “ First Installment Price ”) will be Fifteen Million Dollars ($15,000,000.00) minus the amount of Funded Debt as set forth on the Estimated Closing Balance Sheet.  Subject to the other provisions of this Article 2 , Purchaser shall pay sixty five percent (65%) of the First Installment Price in the form of cash (the “ First Installment Cash Consideration ”) and shall pay the remainder of the First Installment Price, namely thirty five percent (35%), in the form of Restricted Purchaser Shares (the “ First Installment Stock Consideration ”).  For purposes of determining the aggregate number of Restricted Purchaser Shares constituting the First Installment Stock Consideration, the Restricted Purchaser Shares shall be valued at their Closing Value.

          2.03           Estimated Closing Balance Sheet .   Not later than five (5) days prior to the First Installment Closing, the Company, with the advice and consultation of Purchaser, shall prepare and deliver an estimated balance sheet as of the First Installment Closing Date (the “ Estimated Closing Balance Sheet ”), together with a (i) good faith estimate of the Net Working Capital of the Company as of the First Installment Closing (the “ Estimated Net Working Capital ”) and (ii) a statement of the Funded Debt of the Company as of the First Installment Closing (the “ Closing Indebtedness ”).  The Estimated Closing Balance Sheet shall be prepared in accordance with GAAP, consistent with the application of GAAP in preparation of the Audited 2004 Financial Statements and with the financial books and records of the Company (which financial books and records are warranted by the Company to be correct and complete), and shall be certified by the Company’s Chief Executive Officer as being a reasonable good faith estimate of the items specified in clauses (i) and (ii) above.

          2.04           Net Working Capital of the Company . 

                      (a)          Not later than sixty (60) days after the First Installment Closing Date, the Company shall deliver to the Seller Representative and the Purchaser a balance sheet of the Company as of the First Installment Closing Date (the “ Audited Closing Balance Sheet ”), audited by KPMG LLP (the “ CPA Firm ”) together with a calculation, prepared by the Company, of the proposed Net Working Capital as of the First Installment Closing Date based on the Audited Closing Balance Sheet (the “ Final Net Working Capital ”).  Each of the Parties shall cooperate with the preparation and audit of the Audited Closing Balance Sheet.

                      (b)          All fees and expenses of the Audited Closing Balance Sheet shall be allocated fifty percent by Purchaser and fifty percent to the Sellers collectively (which portion shall be treated as a Sellers’ Expense).  The Audited Closing Balance Sheet shall be prepared in accordance with GAAP consistently applied with the accounting principles used in the preparation of Audited 2004 Financial Statements and with the financial books and records of the Company (which financial books and records are warranted by the Company to be correct and complete) (collectively, the “ Agreed ”). 

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Accounting Procedures To the extent permitted by the CPA Firm, which permission Purchaser shall request, the Seller Representative and Purchaser shall each have access to all working papers and other records relative to the preparation and audit thereof, and shall each have reasonable access to the personnel and financial records of the Company for the purpose of determining any item reflected on the Audited Closing Balance Sheet.  The Audited Closing Balance Sheet shall be conclusive and binding on the Parties unless the Seller Representative or Purchaser delivers a detailed statement describing its objections thereto to the other Party (“ Objection Notice ”) within thirty (30) days after the delivery of the Audited Closing Balance Sheet to the Purchaser and the Seller Representative, provided that no objection shall be valid unless it relates to the failure of the Audited Closing Balance Sheet to comply with the Agreed Accounting Procedures.  Any Objection Notice shall be in sufficient detail such that the other Party can determine the nature, basis and, to the extent possible, amount of such objections.  Purchaser and the Seller Representative will use their good faith efforts to resolve any such objections themselves.  In the event an Objection Notice is delivered by the Seller Representative or Purchaser, Purchaser and the Seller Representative shall meet (either in person or telephonically) within fifteen (15) days after delivery of the Objection Notice to attempt to resolve such objections.

                    (c)          In the event that Purchaser and the Seller Representative do not obtain a final resolution within thirty (30) days after delivery of any Objection Notice, then the Second CPA Firm shall resolve such dispute pursuant to the provisions of Section 3.04(b) .

                    (d)          Five (5) Business Days after the final determination of the Final Net Working Capital pursuant to the preceding provisions of this Section 2.04 :

                                    (i)          If the Final Net Working Capital exceeds Five Hundred Fifty Thousand and No/100 Dollars ($550,000.00) (the “ Targeted Net Working Capital ”), Purchaser will cause the Company to distribute the amount of such excess in cash to the Sellers, such distributions to be made to the Sellers in the proportions set forth on Schedule 4.02 ; and

                                    (ii)          If the Final Net Working Capital is less than the Targeted Net Working Capital, the Sellers will make a contribution of cash to the Company in the amount of such deficiency, which will be treated as a capital contribution under the New Operating Agreement, the Sellers’ respective shares of such contribution to be in the proportions set forth on Schedule 4.02 .  Any adjustments pursuant to this Section 2.04 shall be treated as an adjustment to the First Installment Price for tax and accounting purposes and the parties agree to treat any adjustment as such.

          2.05           First Installment Closing . Subject to the conditions of this Agreement, the purchase and sale of the First Installment Interests provided for in this Article 2 (the “ First Installment Closing ”) will take place at the offices of Greensfelder, Hemker & Gale, P.C. at 10 South Broadway, Suite 2000, Saint Louis, Missouri, at 10:00 a.m., local time, on the fifth (5 ^th ) Business Day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the First Installment Closing (other than conditions with respect to actions the respective Parties will take at the Closing itself) or on such other date or location as the Parties may mutually determine (the “ First Installment Closing Date ”); provided, however, that the First Installment Closing Date shall be no later than November 30, 2005.

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          2.06           First Installment Closing Deliveries .

                    (a)          At the First Installment Closing, the Company and the Sellers will deliver, or cause to be delivered, to Purchaser:

                                   (i)          [Intentionally deleted.]

                                    (ii)       Employment agreements (collectively, the “ Employment Agreements ”), in the forms attached hereto as Exhibit C-1 through Exhibit C-12 , each duly executed by the Company and by each of the Sellers, Larry Gilkerson, Al Marano, William Rouse, and Kathy Ruskin (collectively, the “ Key Employees ”), respectively, which shall, among other things, have the effect of canceling and terminating, without liability to the Company, any employment agreement previously entered into by and between such Key Employee and the Company;

                                    (iii)     A Second Amended and Restated Operating Agreement of the Company, dated effective as of the First Installment Closing Date in the form of Exhibit D , duly executed by the Company and the Sellers (the “ New Operating Agreement ”);

                                    (iv)     Stock restriction agreements (collectively, the “ Stock Restriction Agreements ”), each in the form attached hereto as Exhibit E , duly executed by each Seller;

                                    (v)      A certificate of the Chief Executive Officer of the Company stating that on and at the First Installment Closing Date (i) each of the representations and warranties set forth in Article 4 is true, correct and accurate in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true, correct and accurate in all respects) at and as of the First Installment Closing Date (except those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), and (ii) each of the conditions specified in Sections 7.01(a)(ii) through (viii) have been satisfied in all respects;

                                    (vi)      The following documents under cover of a letter, satisfactory in form and substance to Purchaser, instructing Purchaser to hold such documents in escrow until the Second Installment Closing and the Third Installment Closing respectively (the “ Document Escrow Letter ”), duly executed by the Seller Representative, Diamond and the Company together with (A) membership interest assignments in the form of Exhibit A , duly executed by Diamond in favor of Purchaser, and dated effective as of the Second Installment Closing Date and Third Installment Closing Date, respectively, (B) two (2) certificates duly executed by Diamond, effective as of the Second Installment Closing Date and Third Installment Closing Date, respectively, stating that on and as of each such respective closing dates, Diamond has good and marketable title to its Membership Interest, free and clear of all Encumbrances and Purchaser will acquire good and marketable title thereto, free of any Encumbrances, and (the “ Seller Closing Certificates ”) (C) any other documents that Purchaser reasonably requests to transfer to Purchaser good and marketable title to all of the Second Installment Interests and the Third Installment Interests, free from any Encumbrances, effective as of such dates;

                                    (vii)     The Third Party Approvals;

                                    (viii)     A copy of the Articles of Organization of the Company with all amendments thereto including the amendment specified in Section 7.01(a)(xiv) , certified by the Secretary of State of Tennessee as of a date not earlier than fifteen (15) days prior to the First Installment Closing Date;

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                                    (ix)      A certificate of the Secretary of the Company, dated as of First Installment Closing Date, in form and substance satisfactory to Purchaser, certifying: (A) there have been no amendments to the Company’s Articles since the date of certification by the Secretary of State of Tennessee referred to in the immediately preceding clause (viii); (B) as to the incumbency and genuineness of the signatures of each officer, Governor or manager of the Company executing and performing under this Agreement and consummating any other transactions contemplated by this Agreement; and (C) that attached to the secretary’s certificate are true copies of the duly adopted resolutions of the Board of Governors of the Company and true copies of the duly adopted resolutions of the Members authorizing the execution and performance of this Agreement;

                                    (x)       Payoff letters from each lender to whom the Company owes any amount of Funded Debt, dated as of the First Installment Closing Date (the “ Payoff Letters ”), confirming the aggregate amount of principal, accrued interest and/or other fees or amounts owed by the Company in respect thereof through and including the First Installment Closing Date, as well as agreeing to terminate any Encumbrances against the Company’s assets upon receipt thereof, and otherwise in form and substance reasonably acceptable to Purchaser;

                                    (xi)      An opinion of Bass, Berry & Sims PLC, which shall be addressed to, and subject to reliance by, Purchaser, dated as of the First Installment Closing Date, with respect to the matters set forth in Exhibit F attached hereto and in form and substance reasonably satisfactory to Purchaser;

                                    (xii)     A certificate or certificates, dated as of a date not more than fifteen (15) days prior to the First Installment Closing Date, duly issued by the Secretary of State of Tennessee and any other state, if any, in which the Company is authorized to do business, in each case indicating that the Company, is in good standing and authorized to do business and that all state franchise and/or Tax Returns and Taxes for all periods ending prior to the First Installment Closing Date have been filed and paid;

                                    (xiii)     General releases executed by each Seller and Key Employee in the form attached hereto as Exhibit G ;

                                    (xiv)     Forms of election in compliance with Section 754 of the Code, as reasonably determined by Purchaser’s counsel, duly executed by the Company and each Seller (the “754 Election Forms”) with respect to both (A) the final short tax year of the Company ending on the First Installment Closing and (B) the tax year of the Company commencing on the First Installment Closing; and

                                    (xv)     Such additional documents, instruments or items of information duly executed by the Sellers, the Company, or the Company’s members, managers, Governors, or officers as may be reasonably requested by Purchaser in respect of any aspect or consequence of the transactions contemplated hereby.

                    (b)          At the First Installment Closing, Purchaser will:

                                   (i)          Deliver to the Sellers the First Installment Cash Consideration, by wire transfer of immediately available funds to the accounts designated in writing by the Sellers not less than two Business Days prior to the First Installment Closing which shall be in accordance with the sharing ratios set forth on Schedule 4.02 ; 

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                                    (ii)        Deliver to the Sellers the Restricted Purchaser Shares, or receipts therefor in accordance with the Stock Restriction Agreements, constituting the First Installment Stock Consideration, which shall be allocated among the Sellers in accordance with the sharing ratios set forth on Schedule 4.02 ;

                                    (iii)       Deliver to the Seller Representative a certificate of the Secretary of Purchaser, dated as of the First Installment Closing Date, in form and substance satisfactory to the Seller Representative, in each case, certifying: (A) that a true and complete copy of Purchaser’s Articles of Incorporation and bylaws, as in full force and effect on the First Installment Closing Date, is attached to such certificate; (B) as to the incumbency and genuineness of the signatures of each officer of Purchaser executing and performing under Agreement and consummating any other transactions contemplated by this Agreement; and (C) that attached to the secretary’s certificate are true copies of the duly adopted resolutions of the board of directors of such Person authorizing the execution and performance of this Agreement, and the consummation of the transactions contemplated hereby;

                                    (iv)      Deliver to the Seller Representative a certificate of an authorized officer of EFSC stating that on and at the First Installment Closing Date (i) each of the representations and warranties set forth in Article 5 is true, correct and accurate in all material respects (except that any representation or warranty that is qualified as to materiality or Material Adverse Effect shall be true, correct and accurate in all respects) at and as of the First Installment Closing Date (except those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), and (ii) each of the conditions specified in Sections 7.02(a) have been satisfied in all respects;

                                    (v)       Payoff amounts, pursuant to any Payoff Letters, of any Funded Debt of the Company which Purchaser elects to pay to the lenders thereof on behalf of the Company;

                                    (vi)      An opinion of Greensfelder, Hemker & Gale, P.C., which shall be addressed to, and subject to reliance by, the Sellers, dated as of the First Installment Closing Date, with respect to the matters set forth in Exhibit H attached hereto and in form and substance reasonably satisfactory to Purchaser;

                                    (vii)     The New Operating Agreement, duly executed by Purchaser; and

                                    (viii)     Such additional documents, instruments or items of information duly executed by the Purchaser, or the Purchaser’s officers as may be reasonably requested by the Sellers in respect of any aspect or consequence of the transactions contemplated hereby.

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ARTICLE 3
DEFERRED PURCHASE OF MEMBERSHIP
INTERESTS; RESOLUTION OF CERTAIN DISPUTES

          3.01           Diamond .  At and as of the First Installment Closing, the Sellers will transfer to Diamond forty percent (40%) of all then issued and outstanding Membership Interests, namely all of their Membership Interests other than those owned by Purchaser after giving effect to the First Installment Closing, and each Seller shall cease to be a Member of the Company.

          3.02           Purchase of Second Installment Interests .

                           (a)          Pursuant to the terms and subject to the conditions of this Agreement, on the later of (i) March 31, 2008 and (ii) two (2) Business Days after the resolution of any dispute regarding the Second Installment Price as contemplated in Section 3.04 (the “ Second Installment Closing Date ”), Diamond will sell and transfer to Purchaser and Purchaser will purchase from Diamond an aggregate portion of Diamond’s Membership Interests constituting fifty percent (50%) of all issued and outstanding Membership Interests then held by Diamond (the “ Second Installment Interests ”), so that upon conclusion of the Second Installment Closing, Purchaser will own eighty percent (80%) of all of the then issued and outstanding Membership Interests.

                           (b)          The aggregate purchase price for the Second Installment Interests (the “ Second Installment Price ”) shall equal:

                                          (i)          the product of (A) a fraction, the numerator of which is the Actual 2006/2007 Weighted Average Pre-Tax Income and the denominator of which is the Targeted 2006/2007 Weighted Average Pre-Tax Income, multiplied by (B) the sum of the First Installment Price plus Nine Million Five Hundred Thousand and 0/100 Dollars ($9,500,000.00); minus

                                          (ii)        the First Installment Price;

provided that in no event shall the Second Installment Payment exceed the excess, if any, of the Maximum Aggregate Purchase Price minus the First Installment Price.

                           (c)          Subject to the conditions of this Agreement, the purchase and sale of the Second Installment Interests (the “ Second Installment Closing ”) shall take place on the Second Installment Closing Date at the time and location designated by Purchaser.  At the Second Installment Closing:

                                          (i)          the Seller Representative will release, pursuant to the terms of the Escrow Letter (A) the membership interest assignments representing the Second Installment Interests, duly executed in favor of Purchaser, (B) the Seller Closing Certificates with respect to the Second Installment Closing and (C) any other documents in respect of the transfer of the Second Installment Interests that were deposited with the Escrow Agent pursuant to Section 2.06(a)(vi) ; and

                                           (ii)        Diamond will execute and deliver to EFSC a Stock Restriction Agreement governing the Second Installment Stock Consideration; provided that Diamond shall be permitted to, and the terms of such Stock Restriction Agreement shall not prohibit Diamond from, transferring all or any portion of the Second Installment Stock Consideration to the members of Diamond in accordance with the Diamond Operating Agreement, subject to such member’s execution and delivery of a Stock Restriction Agreement in the form of Exhibit E .

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                            (d)          On the Second Installment Closing Date, Purchaser will:

                                           (i)          Deliver to Diamond an aggregate amount determined in Purchaser’s discretion but in no event less than thirty percent (30%) of the Second Installment Price (the “ Second Installment Cash Consideration ”), by wire transfer of immediately available funds in accordance with instructions delivered by the Seller Representative not less than two (2) Business Days prior to the Second Installment Closing Date; and

                                           (ii)         Deliver to Diamond such number of Restricted Purchaser Shares having an aggregate Closing Value equal to the remainder of the Second Installment Price (the “ Second Installment Stock Consideration ”).

                                           (iii)        Notwithstanding the foregoing, in the event shares of EFSC’s common stock are not publicly traded on a securities exchange or the Nasdaq National Market, the Purchaser shall pay 100% of the Second Installment Price in cash by wire transfer of immediately available funds in accordance with subsection (i) above.

          3.03           Purchase of Third Installment Interests .

                           (a)          Pursuant to the terms and subject to the conditions of this Agreement, on the later of (i) March 31, 2010 and (ii) two (2) Business Days after the resolution of any dispute regarding the Third Installment Price (the “ Third Installment Closing Date ”), Diamond will sell and transfer to Purchaser and Purchaser will purchase from Diamond all of the issued and outstanding Membership Interests then held by Diamond (the “ Third Installment Interests ”).

                            (b)          The aggregate purchase price for the Third Installment Interests (the “ Third Installment Price ”) shall equal:

                                           (i)          the product of (A) a fraction, the numerator of which is the Actual 2008/2009 Weighted Average Pre-Tax Income and the denominator of which is the Targeted 2008/2009 Weighted Average Pre-Tax Income, multiplied by (B) the Maximum Purchase Price; minus

                                           (ii)         the Second Installment Price; and minus

                                           (iii)        the First Installment Price;

provided that in no event shall the Third Installment Price exceed the excess, if any, of the Maximum Purchase Price minus the First Installment Price minus the Second Installment Price.

                            (c)          Subject to the conditions of this Agreement, the purchase and sale of the Third Installment Interests (the “ Third Installment Closing ”) shall take place on the Third Installment Closing Date at the time and location designated by Purchaser.  At the Third Installment Closing:

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                                           (i)          the Seller Representative will cause the Document Escrow Agent to deliver (A) the membership interest assignments representing the Third Installment Interests duly executed by Diamond in favor of Purchaser, (B) the Seller Closing Certificates with respect to the Third Installment Closing and (C) any other documents in respect of the transfer of the Third Installment Interests that were deposited with the Escrow Agent pursuant to Section 2.06(a)(vi) ; and

                                           (ii)        Diamond will execute and deliver to EFSC a Stock Restriction Agreement governing the Third Installment  Stock Consideration, to the extent any portion thereof is not subject to the Stock Restriction Agreement described in Section 3.02(i)(ii) ; provided that Diamond shall be permitted to, and the terms of such Stock Restriction Agreement shall not prohibit Diamond from, transferring all or any portion of the Second Installment Stock Consideration to the members of Diamond in accordance with the Diamond Operating Agreement, subject to such member’s execution and delivery of a Stock Restriction Agreement in the form of Exhibit E .

                            (d)          On the Third Installment Closing Date, Purchaser will:

                                           (i)          Deliver to Diamond an aggregate amount determined in Purchaser’s discretion but in no event less than thirty percent (30%) of the Third Installment Price (the “ Third Installment Cash Consideration ”), by wire transfer of immediately available funds in accordance with instructions delivered by the Seller Representative not less than two (2) Business Days prior to the Third Installment Closing Date;  and

                                           (ii)          Deliver to Diamond such number of Restricted Purchaser Shares having an aggregate Closing Value equal to the remainder of the Third Installment Price (the “ Third Installment Stock Consideration ”).

                                           (iii)         Notwithstanding the foregoing, in the event shares of EFSC’s common stock are not publicly traded on a securities exchange or the Nasdaq National Market, the Purchaser shall pay 100% of the Third Installment Price in cash by wire transfer of immediately available funds in accordance with subsection (i) above.

          3.04           Resolution of Certain Disputes . 

                           (a)          The Actual 2006/2007 Weighted Average Pre-Tax Income and the Actual 2008/2009 Weighted Average Pre-Tax Income shall be based on the Company’s unaudited financial statements for the applicable fiscal years (the “ Post-Closing Financial Statements ”), each of which shall be prepared by Purchaser consistent with the books and records of the Company and in accordance with GAAP applied consistently with the Audited 2004 Financial Statements.  Purchaser shall deliver to the Seller Representative each of the Post-Closing Financial Statements prior to three Business Days following EFSC’s filing of any form or report with the SEC, including without limitation a Current Report on Form 8-K, which contains EFSC’s consolidated earnings for such fiscal year, but in no event later than February 28 following such fiscal year.  Such delivery of the Post-Closing Financial Statements for the 2007 Fiscal Year and the 2009 Fiscal Year shall be accompanied by Purchaser’s calculation of the Second Installment Price and the Third Installment Price, as applicable.  The Seller Representative shall have access to all of Purchaser’s working papers and other records relative to the preparation of the Post-Closing Financial Statements, and shall have reasonable access to the personnel and financial records of the Company for the purpose of determining any item reflected on the Post-Closing Financial Statements.  Each of the Post-Closing Financial Statements shall be conclusive and binding on the Parties unless the Seller Representative delivers an Objection Notice within thirty (30) days after Purchaser’s delivery thereof to the Seller Representative. Any

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Objection Notice shall be in sufficient detail such that Purchaser can determine the nature, basis and, to the extent possible, amount of such objections.  Purchaser and the Seller Representative will use their good faith efforts to resolve any such objections themselves.  In the event an Objection Notice is delivered by the Seller Representative, Purchaser and the Seller Representative shall meet (either in person or telephonically) within fifteen (15) days after delivery of the Objection Notice to attempt to resolve such objections.  In the event that Purchaser and the Seller Representative do not obtain a final resolution within thirty (30) days after delivery of any Objection Notice, then the Second CPA Firm shall resolve such dispute pursuant to the provisions of Section 3.04(b) .

                            (b)          In the event of any dispute between Purchaser and the Seller Representative contemplated in Section 2.04(c) or Section 3.04(a) , Deloitte & Touche LLP (the “ Second CPA Firm ”) shall resolve any objections which remain unresolved and determine the Audited Closing Balance Sheet and/or any disputed Post-Closing Financial Statements in accordance with the provisions of this Agreement.  Purchaser and the Seller Representative shall deliver to the Second CPA Firm all financial information concerning the Company reasonably necessary to resolve the objections in such Objection Notice, including the Audited Closing Balance Sheet or the disputed Post-Closing Financial Statements, a fully executed copy of this Agreement, the applicable work papers of the CPA Firm or other independent accounting firm if applicable and, to the extent permitted by the CPA Firm or other independent accounting firm, which permission Purchaser shall request, and each of Purchaser’s and the Seller Representative’s applicable calculations, including calculations of the Final Net Working Capital, Actual 2006/2007 Weighted Average Pre-Tax Income, Actual 2008/2009 Weighted Average Pre-Tax Income, the Second Installment Price or the Third Installment Price.  Purchaser and the Seller Representative shall also instruct the Second CPA Firm to make its final determination based solely on presentations by Purchaser and the Seller Representative which are in accordance with the guidelines and procedures set forth in this Agreement (i.e., not on the basis of an independent review).  The resolution by the Second CPA Firm of such objections and determination of the Audited Closing Balance Sheet, disputed Post-Closing Financial Statements and/or disputed calculations shall be: (i) set forth in writing; (ii) delivered to Purchaser and the Seller Representative within thirty (30) days after delivery to the Second CPA Firm of the financial and other information provided for herein; and (iii) conclusive and binding upon Purchaser, the Company and the Seller Representative.  The fees and expenses of the Second CPA Firm shall be allocated fifty percent to Purchaser and fifty percent to the Sellers.

          3.05           Stock Restriction Agreement .  If Diamond transfers any portion of the Second Installment Stock Consideration or the Third Installment Stock Consideration to any member of Diamond, such transferee shall execute and deliver a Stock Restriction Agreement if and to the extent such transferee is not already a party to a Stock Restriction Agreement.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          The Company and the Sellers hereby represent and warrant to Purchaser that the statements contained in this Article 4 are true, correct and complete as of the date of this Agreement and will be true, correct and complete as of the First Installment Closing Date (as though made then and as though the First Installment Closing Date were substituted for the date of this Agreement throughout this Article 4 ), except as may be set forth in the disclosure schedules attached to this Agreement and incorporated as if fully set forth herein (the “ Schedules ”).  The Schedules are arranged and numbered corresponding to the numbered and lettered sections contained in this Article 4 , and any item disclosed

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in the Schedules shall be deemed disclosed on and incorporated in and under each other section of the Schedules in which such disclosure is, on its face, reasonably apparent; provided that the mere listing (or inclusion of a copy) of a document shall not be deemed adequate to disclose the contents of such document or an exception to a representation or warranty made herein. 

          4.01           Incorporation, Qualification and Power .  The Company and Diamond are each limited liability companies duly organized, validly existing and in good standing under the laws of the State of Tennessee.  MDI is a corporation, duly organized, validly existing and in good standing under the laws of the State of Tennessee.  The Company, Diamond and MDI have full requisite power and authority to carry on the business in which each is engaged in the manner now conducted and presently proposed to be conducted and to own and use the properties owned and used by each of them.  The Company, Diamond and MDI are duly authorized to conduct business and are in good standing under the laws of each jurisdiction where such qualification is required, each of which are identified on Schedule 4.01 , except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to cause Damages to the Company.  Diamond has previously delivered to Purchaser true, correct and complete copies of its articles of organization (the “ Diamond Articles ”) and operating agreement (the “ Diamond Operating Agreement ”), in each case as amended to date.  The Company has previously delivered to Purchaser true, correct and complete copies of its Articles of Formation (the “ Company’s Articles ”) and operating agreement (the “ Company’s Operating Agreement ”) of the Company, in each case as amended to date excluding the amendment contemplated by Section 7.01(a)(xiv) .  MDI has previously delivered to Purchaser true, correct and complete copies of its Articles of Incorporation (the “ MDI Articles ”) and bylaws (the “ MDI Bylaws ”).  The membership and stock ledgers of the Company and MDI are true, correct and complete in all respects.  The Company is not in default under or in violation of any provision the Company’s Articles.  None of the Company, any Seller, Governor or manager is in default under or in violation of any provision of the Company’s Operating Agreement.  MDI is not in default of any provision of the MDI Articles or the MDI Bylaws.

          4.02           Capitalization .  Schedule 4.02 sets forth a complete and accurate list of all members of the Company together with each member’s respective address, capital account as of the date hereof and share of the profits and losses of the Company.  At the First Installment Closing, no Seller’s capital account on the Company’s books shall be less than zero.  The Sellers constitute all of the members of the Company and the Membership Interests held by the Sellers constitute all Membership Interests of the Company.  Other than the Sellers, Diamond and the members of Diamond, there are no persons who have any rights to the profits, losses, distributions or other economic interest in the Company.  The rights and obligations of the Members with respect to the Membership Interests are as set forth in the Company’s Articles and the Company’s Operating Agreement and except as set forth therein there are no (i) voting trusts, proxies or other agreements or understandings with respect to the voting of the Membership Interests or (ii) agreements or other understandings (whether or not contingent) with respect to any restrictions on the transfer of any Membership Interests.  Other than as contemplated by this Agreement, no Person other than Diamond and the members of Diamond has any agreement, option, warrant, right or privilege, whether by law or contract, for the purchase from the Sellers of any of the Membership Interests, nor any agreement, convertible security, option, warrant, right or privilege to subscribe for or otherwise acquire any Membership Interest, whether by law or contract.  There are no outstanding or authorized equity appreciation, equity participation or similar rights with respect to the Company.  There are no declared but unpaid distributions.  The Sellers and the individuals set forth on Schedule 4.02 will, as of the First Installment Closing Date, constitute all of the members of Diamond and the membership interests of Diamond held by the Sellers and the

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individuals set forth on Schedule 4.02 shall constitute all of the membership interests of Diamond.  The Company has not violated any federal or state securities laws in connection with the offer, sale or issuance of the Membership Interests.  On the respective closing dates contemplated by Articles 2 and 3 , Purchaser will acquire good and marketable title to the Membership Interests as contemplated thereby, free and clear of all Encumbrances.

          4.03           Subsidiaries . Except for MDI, the Company does not have any Subsidiaries.  Schedule 4.03 sets forth a correct and complete list of the owners of the capital stock of MDI, including their respective names, addresses, and number and class of shares owned.  The Company is the record and beneficial owner of, and has good and marketable title to, the shares of outstanding capital stock of MDI indicated on Schedule 4.03 , free and clear of all Liens.  All of the issued and outstanding shares of capital stock of MDI have been duly authorized, are validly issued, fully paid, and nonassessable and are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal.  MDI does not have outstanding any capital stock or securities convertible or exchangeable for any of its capital stock or containing any profit participation features, nor any rights or options to subscribe for or to purchase any of its capital stock or any securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans.  MDI is not subject to any option or obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock.  MDI has not violated any federal or state securities laws in connection with the offer, sale or issuance of its capital stock.  There are no agreements, other than solely with the Company, with respect to the voting or transfer of the capital stock of MDI.  Except for the Company’s ownership of MDI, the Company does not own or hold the right to acquire any shares of stock or any other security or interest in any other Person or any obligation to make any investment in any Person.

          4.04           Authorization of Transaction .  This Agreement constitutes and each other agreement to be executed and delivered by the Company, the Sellers and Diamond at the First Installment Closing, the Second Installment Closing and the Third Installment Closing (collectively, the “ Seller Party Closing Documents ”) will constitute the valid and legally binding obligation of the Company, the Sellers and Diamond, enforceable in accordance with their respective terms and conditions, except to the extent that (i) enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium, or similar laws now or hereafter in effect relating to or limiting creditors’ rights generally, and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court or other similar Person before which any proceeding therefor may be brought.  The Company, each Seller and Diamond have the absolute and unrestricted right, power and authority to execute and deliver this Agreement and the Seller Party Closing Documents and to perform its respective obligations under this Agreement and the Seller Party Closing Documents, and such action has been duly authorized by all necessary action on the part of the Company, each Seller and Diamond.  The Company’s Board of Governors and Diamond’s Board of Governors have duly authorized the execution and delivery of this Agreement by each of them and the performance of their respective obligations hereunder and all action and approvals required under the Tennessee Act in order to consummate the transactions contemplated by this Agreement have occurred prior to the date hereof. 

          4.05           Noncontravention .  Except as set forth on Schedule 4.05 , the execution and delivery by the Company, the Sellers and Diamond of this Agreement and all of the other agreements and instruments contemplated hereby to which the Company, MDI, the Sellers or Diamond is a party and the fulfillment of and compliance with the respective terms hereof and thereof by the Company and the

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Sellers do not and shall not (i) result in a breach of the terms, conditions or provisions of, (ii) constitute a default under (whether with or without the passage of time, the giving of notice or both), (iii) result in the creation of any Encumbrance pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any Governmental Authorization or other Consent or other action of or by or notice or declaration to, or filing with, any third party or any Governmental Body pursuant to, (I) the Company’s Articles, the Company’s Operating Agreement, the Diamond Articles or the Diamond Operating Agreement, or (II) any Law to which the Company, MDI or any Seller is subject, or (III) any order, judgment or decree to which the Company, MDI or any Seller is subject, or (IV) any Contract.

          4.06           Books and Records .  The books of account and other financial records of the Company and MDI, all of which have been delivered or made available to Purchaser, are complete and correct in all material respects and represent actual, bona fide transactions and have been maintained in accordance with sound business practices.  The minute books of the Company, copies of all of which have been delivered to Purchaser, contain in all material respects accurate and complete records of all meetings held of, and action taken by, the members, the Board of Governors and any committees of the Board of Governors of the Company, and no such meetings have been held for which minutes have not been prepared or are not contained in such minute books.  The minute books of MDI, copies of all of which have been delivered to Purchaser, contain in all material respects accurate and complete records of all meetings held of, and corporate action taken by, the shareholders, the Board of Directors and any committees of the Board of Directors of MDI, and no such meetings have been held for which minutes have not been prepared or are not contained in such minute books. 

          4.07           Financial Statements . 

                           (a)          Attached to Schedule 4.07(a) are the following financial statements of the Company:  (i) audited, consolidated, balance sheet and related statements of income and members’ equity and statements of cash flows as of and for the fiscal year ended December 31, 2003 (the “ Audited 2003 Financial Statements ”); (ii) audited and consolidated balance sheet and related statements of income and members equity and statements of cash flows as of and for the fiscal year ended December 31, 2004 (the “ Audited 2004 Financial Statements ”); and (iii) unaudited, consolidated internally prepared Balance Sheet and related statements of income and members’ equity and statements of cash flows as of and for the six (6) month period ended June 30, 2005 (such balance sheet, the “ Interim Balance Sheet ” and collectively with such statement of income, the “ Interim Financial Statements ”).  The attached financial statements described in the preceding clauses (i), (ii) and (iii) shall be collectively referred to as the “ Financial Statements .”

                            (b)          Each of the Financial Statements (including in all cases the notes thereto, if any) have been prepared on a consistent basis throughout the periods covered thereby, present fairly in all material respects the financial condition of the Company as of such dates and the results of operations of the Company for such periods, are correct and complete in all material respects.

                            (c)          The Audited 2003 Financial Statements, the Audited 2004 Financial Statements and the Interim Financial Statements have each been prepared in accordance with GAAP, consistently applied, except for the absence of footnote disclosure and year end adjustments in the Statements.

                            (d)          The Audited Closing Balance Sheet will be prepared in accordance with GAAP, applied consistently with the Audited 2004 Financial Statements, present fairly the financial condition of the Company as of the First Installment Closing Date, will be correct and complete in all material respects, and will be consistent with the financial books and records of the Company.

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          4.08           Tax Matters .

                           (a)          The Company and MDI have duly and timely filed all state and federal Income Tax Returns, all sales or use Tax Returns and all other Tax Returns that each was required to file.  All such Tax Returns are correct and complete in accordance with applicable Law as filed.  All Taxes owed by the Company and MDI (whether or not shown on any Tax Return) have been paid and all taxes accrued and not paid prior to Closing will be properly reflected on the Audited Closing Balance Sheet in accordance with GAAP.  There are no Encumbrances on any of the assets of the Company or MDI that arose in connection with any failure (or alleged failure) to pay any Tax.

                            (b)          The Company and MDI have withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.

                            (c)          There is no dispute or claim concerning any Tax Liability of the Company or MDI either: (i) claimed or raised by any Governmental Body in writing; or (ii) as to which the Sellers, the Company or MDI has Knowledge based upon personal contact with any agent of such authority.  Schedule 4.08(c) lists all federal, state, local and foreign Income Tax Returns, all state sales or use Tax Returns and all other Tax Returns filed with respect to the Company for taxable periods ended on or after December 31, 2002 and specifically indicates any Tax Returns that have been audited or that currently are the subject of an ongoing audit by any Governmental Body.  The Company and MDI have delivered to Purchaser correct and complete copies of all such Tax Returns and all examination reports and statements of deficiencies assessed against or agreed to by the Company since December 31, 2002.

                            (d)          Except as set forth on Schedule 4.08(d) , neither the Company nor MDI has waived any statute of limitations in respect of Taxes, agreed to any extension of time with respect to a Tax assessment or deficiency and is not the beneficiary of any extension of time within which to file any Tax Return.

                           (e)          Neither the Company nor MDI is a party to or bound by any Tax allocation or Tax sharing agreement with any Person, and has no current or potential contractual obligation to indemnify any other Person with respect to Taxes.

                            (f)          Neither the Company nor MDI has any liability for the Taxes of any Person (other than the Company or MDI) under Treas. Reg. § 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by contract, or otherwise.

                            (g)          No claim has ever been made by a taxing authority in a jurisdiction where the Company or MDI does not file Tax Returns that the Company or MDI is or may be subject to taxation by such jurisdiction.

                 &