EXHIBIT 10.22
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of December 31, 2004, by and
among XXXXX NATIONAL LEASING, INC., a New York corporation having an address at
Xxx Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx 00000 ("Buyer"), XXXXX BANCORP INC., a New
York corporation having an address at 00-00 Xxxxx Xxxx Xxxxxx, Xxxxxx, Xxx Xxxx
00000 ("Xxxxx"), M & C LEASING CO., INC., a New York corporation having an
address at 0000 Xxxxx Xxxx, Xxxxx 0, Xxxx Xxxxxx, Xxx Xxxx 00000-0000
("Seller"), APCOT NY CORP., a New York corporation having an address at 0000
Xxxxx Xxxx, Xxxxx 0, Xxxx Xxxxxx, Xxx Xxxx 00000-0000 ( "Shareholder"), XXXX
XXXXX, an individual having an address at 0 Xxxxxxx Xxxx, Xxxxxxx Xxxx, Xxx Xxxx
00000 ("Xxxxx"), and solely for the purpose of Section 6.7 hereof, XXXXX XXXXX,
an individual having an address at 0000 Xxxxxxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx
00000 ("Employee").
WHEREAS, Seller is in the business of equipment leasing;
WHEREAS, Buyer has offered to buy, and Seller has offered to sell,
substantially all of the assets used in the Business (as such term is defined in
Article 1 below) of Seller; and
WHEREAS, Shareholder owns all of the issued and outstanding capital stock
of Seller; and
WHEREAS, Xxxxx owns all of the issued and outstanding capital stock of the
Shareholder; and
WHEREAS, concurrently with the execution of this Agreement and as a
condition of the consummation of the transactions contemplated herein, Xxxxx
will enter into the Personal Goodwill Purchase Agreement with Buyer pursuant to
which Xxxxx will transfer all of the Personal Goodwill to Buyer upon the terms
and conditions set forth in the Personal Goodwill Purchase Agreement;
NOW THEREFORE, in consideration of the mutual covenants, representations
and warranties made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 2 CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms are defined terms and
shall have the meanings set forth below:
"2006 Earn-Out Payment" has the meaning set forth in Section
2.3.1(c)(i)(2) of this Agreement.
"2006 Earn-Out Target" has the meaning set forth in Section 2.3.1(c)(i)(2)
of this Agreement.
"Accountant Statement" has the meaning set forth in Section 2.3.1(d)(ii).
"Affiliate" means, with respect to any entity, all directors and officers
of such entity, all persons and entities controlling, controlled by or under
common control with such entity, and all directors and officers of such other
entity; and with respect to any individual, any person who is related by blood
or marriage to such individual.
"Agreement" refers to this entire Agreement, including the exhibits and
schedules referred to herein.
"Annual Targets" have the meaning and are identified in Section
2.3.1(c)(ii)(1) and (2) of this Agreement.
90
"Ancillary Agreements" means collectively the Personal Goodwill Purchase
Agreement, the Employment Agreements and all other agreements and documents to
be executed as contemplated by an in connection with this Agreement.
"Assumed Contracts" means those contracts, leases, licenses and agreements
to which Seller is a party, which are specifically identified on Exhibit A as
being assumed by Buyer, and (b) all Equipment Leases entered into by Seller in
the ordinary course of business consistent with past practices prior to the
Closing Date which Equipment Leases have not expired prior to the Closing Date.
"Assumed Liabilities" means (a) the obligations of Seller under the
Assumed Contracts; (b) liabilities for advance payments from customers that are
reflected on the Financial Statements; and (c) security deposits in the
aggregate amount of $177,862 transferred to Buyer at Closing, which security
deposits were collected by Seller for refunds to lessees under the Equipment
Leases included among the Purchased Assets (the "Transferred Deposits").
"Balance Sheet Date" has the meaning set forth in Section 3.6 of this
Agreement.
"Bulk Sales Escrow Account" has the meaning set forth in Section 2.3.1(a)
of this Agreement.
"Bulk Sales Tax Notice" has the meaning set forth in Section 2.3.1(a)(i)
of this Agreement.
"Business" means the equipment leasing business of Seller as such business
is currently conducted.
"Business Information and Records" means all records, information, files
and papers of Seller relating to the Business, including, without limitation,
the original of each Equipment Lease and all related schedules, addenda, riders,
supplements and guarantees, other customer records and files, vendor,
manufacturer and supplier lists, advertising and promotional materials, sales
and purchase correspondence, sales reports, personnel records and books of
account.
"Buyer" has the meaning set forth in the introductory paragraph of this
Agreement.
"Buyer Indemnitees" has the meaning set forth in Section 10.2 of this
Agreement.
"Cash Portion of the 2006 Earn-Out Payment" has the meaning set forth in
Section 2.3.1(c)(i) of this Agreement.
"Cash Purchase Price" has the meaning set forth in Section 2.3.1(a) of
this Agreement.
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Date" means December 31, 2004.
"Code" means the Internal Revenue Code of 1986, as amended.
"Contingent Purchase Price" shall mean the Base Earn-Out and the
Additional Earn-Out as described in Section 2.3.1(c) of this Agreement.
"Employment Agreement" or "Employment Agreements" has the meaning set
forth in Section 6.7 of this Agreement.
"Equipment" means the equipment and other property covered by an Equipment
Lease, together with any and all attachments, accessories, accessions,
additions, improvements, replacements and substitutions incorporated or
installed on or in any item thereof and all rights and interests of Seller
therein, including any
91
manufacturer's representations and warranties relating to or covering the
Equipment and the residual interest in the Equipment at the end of the Equipment
Lease term.
"Equipment Lease" means an equipment lease, direct financing lease, master
lease agreement, loan and security agreement and all related schedules,
supplements, riders, addenda and guarantees, or any other financing arrangement
arising out of the lease, rental or financing of Equipment by Seller, which
evidences the payment obligation of the lessee.
"Equipment Lease Payments" means any and all payments due and owing, or to
become due and owing, to Seller pursuant to an Equipment Lease.
"ERISA" means The Employee Retirement Income Security Act of 1974, as
amended.
"Xxxxx" has the meaning set forth in the introductory paragraph of this
Agreement.
"Xxxxx Stock" has the meaning set forth in Section 2.3.1(c)(i) of this
Agreement.
"Excluded Assets" means (a) all payments made and to be made to Seller
under this Agreement and all other rights of Seller hereunder; (b) all tax
refunds relating to periods prior to the Closing; (c) the minute book and all
formation documents of Seller; (d) all claims, rights or causes of action
relating to any Excluded Asset or Excluded Liability; (e) any and all prepaid
insurance premiums; and (f) all cash and cash equivalents other than the
Transferred Deposits.
"Excluded Liabilities" means all liabilities of Seller that are not
expressly included as Assumed Liabilities.
"Financial Statements" has the meaning set forth in Section 3.6 of this
Agreement.
"First Niagara Bank Leases" has the meaning set forth in Section
2.3.1(b)(ii) of this Agreement.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Xxxxx" has the meaning set forth in the introductory paragraph of this
Agreement.
"Grid Note" has the meaning set forth in Section 2.3.1(b)(i) of this
Agreement.
"Governmental Entity" means any court or tribunal or any governmental,
regulatory or administrative body, agency or authority, whether federal, state,
local or foreign.
"Hazardous Material" means any hazardous or toxic substance, material or
waste or pollutants, contaminants or asbestos-containing material that is or
becomes regulated by any authority in any jurisdiction in which any Leased Real
Estate or any real property previously owned or leased by Seller is located.
"Leased Real Estate" has the meaning set forth in the definition of
"Purchased Assets" in this Article 1.
"Intellectual Property" means all right, title or interest of Seller in
any and all United States and foreign trademarks, service marks, trade names,
copyrights, proprietary technology, trade secrets, know-how, licenses, computer
software, inventions, patents, utility models, processes, designs, domain names,
formulae, and methodologies, whether such rights arise at common law or by
registration, together with any and all applications and registrations with
respect to any of the foregoing, used in connection with the Business as it is
currently conducted.
"Leases" shall have the meaning set forth in Section 3.18 of this
Agreement.
"Liability Claims" has the meaning set forth in Section 10.4.3 of this
Agreement.
92
"Lien" means a lien, mortgage, pledge, charge, encumbrance, conditional
sale agreement or security interest.
"Material Adverse Effect" means (a) any change, event, fact or
circumstance, whether or not covered by insurance, that has or would have a
material adverse effect on the business, operations, property, prospects,
condition (financial or otherwise), assets or liabilities of Seller, or (b) any
change, event, fact or circumstance that would materially impair, or cause a
material delay in, Seller's, Shareholder's or Xxxxx'x ability to perform their
obligations under this Agreement or under the Ancillary Agreements to which
Seller, Shareholder and/or Xxxxx is or may be a party.
"Material Contracts" has the meaning set forth in Section 3.12 of this
Agreement.
"Net Income, Before Taxes" means net income before taxes as calculated in
accordance with GAAP consistently applied in the United States of America and
utilizing accounting policies historically used in the preparation of Buyer's
financial statements. Included in this calculation of Net Income, Before Taxes
are specific allocations from Xxxxx and Xxxxx National Bank and interest expense
as discussed in paragraph 1 of that certain letter agreement dated December 31,
2004 by and among Buyer and Seller.
"Operating Assets" means all right, title or interest of Seller in any
machinery, equipment, spare parts, vehicles, furniture, tools and supplies
owned, leased, licensed or otherwise possessed by Seller and used in connection
with the Business, and any manuals, product literature, and manufacturer's
representations and warranties that relate to any of the foregoing, excluding
any such items that are sold, transferred, disposed of or consumed by Seller
prior to the Closing Date in the ordinary course of business and consistent with
past practices.
"Permits" means all permits, licenses, franchises, registrations, and
other evidences of authority to carry on a particular activity.
"Person" means an individual or entity.
"Personal Goodwill" means Xxxxx'x reputation, personal relationships with
customers and suppliers, and expertise relating to, and used in connection with,
the Business.
"Personal Goodwill Purchase Agreement" has the meaning set forth in
Section 6.8 of this Agreement.
"Purchased Assets" means all of Seller's right, title and interest in, to
and under all of the tangible and intangible assets of Seller of every kind and
description other than the Excluded Assets used in connection with the Business,
including without limitation: (a) the leasehold and subleased hold interests of
Seller in all real property listed on Schedule 1.0 hereto (collectively, the
"Leased Real Estate"), together with all interests of Seller in the buildings,
structures, installations, fixtures, trade fixtures and other improvements
situated thereon and all easements, rights of way and other rights, interests,
and appurtenances of Seller therein or thereunto pertaining (collectively with
the Leased Real Estate, the "Leasehold Interests"); (b) the Equipment; (c) the
Equipment Lease Payments; (d) the Transferred Deposits; (e) Receivables; (f) the
Operating Assets; (g) the Equipment Leases; (h) the Leases; (i) the Intellectual
Property; (j) the Business Information and Records; (k) the Assumed Contracts;
(l) the Permits; (m) the name "M & C Leasing Co., Inc.", and all derivatives
thereof; (n) the domain name "M&XXxxxxxx.xxx" (o) all rights of Seller in or
under any refunds, and prepaid expenses, excluding prepaid insurance premiums;
(p) all claims, rights (including without limitation guarantees, warranties and
indemnities) and causes of action relating to any Purchased Asset or Assumed
Liability); (q) all warranties or guarantees by any manufacturer, supplier or
other vendor to the extent solely related to any of the Purchased Assets; and
(r) all goodwill of the Business as a going concern and all other intangible
properties.
"Purchase Price" has the meaning set forth in Section 2.3.1 of this
Agreement.
93
"Receivables" means all unpaid accounts, notes and other miscellaneous
receivables in favor of Seller with respect to the Business (including any
credit card receivables), together with all collateral security therefor.
"Repaid Indebtedness" has the meaning set forth in Section 2.3.1(b) of
this Agreement.
"Reviewing Accountants" has the meaning set forth in Section 2.3.1(d)(ii)
of this Agreement.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to the Securities Act
or any successor law.
"Seller" has the meaning set forth in the introductory paragraph of this
Agreement.
"Seller's Bylaws" has the meaning set forth in Section 3.1 of this
Agreement.
"Seller's Capital Stock" has the meaning set forth in Section 3.2.1 of
this Agreement.
"Seller's Certificate of Incorporation" has the meaning set forth in
Section 3.1 of this Agreement.
"Seller Indemnitees" has the meaning set forth in Section 10.3 of this
Agreement.
"Shareholder" has the meaning set forth in the introductory paragraph of
this Agreement.
"Shareholder's Capital Stock" has the meaning set forth in Section 3.2.2
of this Agreement.
"Statement of Objection" has the meaning set forth in Section 2.3.1(d)(i).
"Stock Portion of the 2006 Earn-Out Payment" has the meaning set forth in
Section 2.3.1(c)(i) of this Agreement
"Tax" or "Taxes" mean all federal, state, county, local, foreign and other
taxes, including income taxes, estimated taxes, excise taxes, sales taxes, use
taxes, gross receipts taxes, franchise taxes, employment and payroll related
taxes, unemployment taxes, property taxes and import duties, whether or not
measured in whole or in part by net income and including deficiencies or other
additions to tax, interest and penalties with respect thereto.
"Tax Return" means, since the date of Seller's incorporation, all returns,
declarations, reports, claims for refund, information statements and other
documents relating to Taxes, including all schedules and attachments thereto,
and including all amendments thereof.
"Transferred Deposits" has the meaning set forth in the definition of
"Assumed Liabilities" in this Article 1.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York.
ARTICLE 3 PURCHASE AND SALE; CLOSING
3.1. Purchase and Sale. At the Closing, upon the terms and subject to the
conditions set forth in this Agreement, Seller shall sell, transfer, convey and
assign to Buyer, and Buyer shall purchase from Seller, all of Seller's right,
title and interest in and to the Purchased Assets. Seller shall transfer good
and marketable title to the Purchased Assets to Buyer, free and clear of all
Liens.
94
3.2. Closing Date. The Closing shall take place at the offices of Xxxxxx
Beach LLP, Xxxxxx at Exchange, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxx
Xxxx 00000 on December 31, 2004 at 10:00 A.M. or at such other date and time as
may be reasonably agreed to by Buyer and Seller.
3.3. Purchase Price.
3.3.1. In consideration of the transfer of the Purchased Assets to
Buyer hereunder, Buyer shall pay to Seller a purchase price (the "Purchase
Price") which will consist of the Cash Purchase Price, the Contingent
Purchase Price and the Repaid Indebtedness.
(a) The Cash Purchase Price will consist of $1,235,862 in cash (the
"Cash Purchase Price"). At the Closing, Buyer shall deliver to Seller a bank
check in the amount of $1,030,138, and the balance of the Cash Purchase Price
shall be allocated as follows: $27,862 of the Cash Purchase Price shall be
allocated to an interest bearing account (the "Bulk Sales Escrow Account") and
$177,862 of the Cash Purchase Price shall represent the Transferred Deposits.
(i) The funds in the Bulk Sales Escrow Account shall be
available to Buyer to pay Seller's liability, if any, for New York State and
local sales and use taxes due from Seller to New York State and contained in the
notice, if any, of total taxes due the State of New York (the "Bulk Sales Tax
Notice") given by the New York State Department of Taxation and Finance to Buyer
and Seller in accordance with section 537.6 of Part 537 of Title 20 of the
NYCRR. Upon payment to New York State of the total taxes determined to be due
from Seller to New York State and set out in the Bulk Sales Notice, and receipt
by Buyer of a notice from the New York State Department of Taxation and Finance
in accordance with section 537.6 of Part 537 of Title 20 of the NYCRR, that the
liability for the payment to the State of New York of any such taxes determined
to be due from Seller have been wholly paid or satisfied or no longer exists,
Buyer shall release to Seller the balance, if any, of any funds remaining in the
Bulk Sales Escrow Account. Buyer and Seller agree, that in the event either
Buyer or Seller disputes the total tax(es) claimed to be due by Seller to the
State of New York as set forth in the Bulk Sales Tax Notice, Buyer and Seller
shall cooperate in good faith with one another to resolve any dispute with the
New York State Department of Taxation and Finance as to such disputed amount to
the reasonable satisfaction of Seller. Further, the parties agree that the Bulk
Sales Escrow Account shall not be the exclusive source from which Buyer may
recover any liability assessed and/or enforced against Buyer, the Purchase Price
or the Purchased Assets as a result of Seller's sales and use tax deficiencies,
if any, to New York State.
(ii) Commencing on December 31, 2005 and each quarter
thereafter, Buyer agrees, that to the extent any security deposits constituting
the Transferred Deposits are forfeited to Buyer under the associated Equipment
Lease and subject to applicable law, to pay over to Seller to the extent
permitted by applicable law any such funds so forfeited up to the aggregate
amount of the Transferred Deposits.
(b) At the Closing, in addition to the Cash Purchase Price, Buyer
shall pay-off the following indebtedness (collectively, the "Repaid
Indebtedness"):
(i) Seller's Grid Note dated April 20, 2004 in the maximum
principal amount of $5,000,000, including any and all term notes executed and
delivered thereunder, evidencing Seller's indebtedness to Manufacturers and
Traders Trust Company (the "Grid Note"), having an aggregate outstanding balance
(including principal, accrued interest and prepayment penalties) as of the
Closing Date of $4,230,334.12. Such repayment shall be made by wire transfer of
immediately available funds to an account designated by Manufacturer and Traders
Trust Company for repayment of the Grid Note; and
(ii) Seller's equipment leases with First Niagara Bank, Lease
Nos. 200328235 and 24990 (collectively, the "First Niagara Bank Leases"), in the
aggregate amount (including principal, accrued interest and prepayment
penalties) as of the Closing Date of $14,167.96. Such repayment shall be made in
the form of a reimbursement to Seller by Buyer, upon Seller's delivery to Buyer
of a letter from First Niagara Bank confirming the payment of any and all
obligations of Seller under the First Niagara Leases
95
and executed UCC-3 Termination Statements terminating UCC-1 Financing Statement
Filing Number 200309241637599 and UCC-1 Financing Statement Filing Number
200278, Filing Date August 30, 2002. Such reimbursement to be made to Seller by
Buyer by bank check in the aggregate amount of $14,167.96.
(c) Contingent Purchase Price.
(i) Base Earn-Out. Within 45 days of December 31, 2006, Buyer
shall calculate the Buyer's Net Income, Before Taxes for its 2006 fiscal year.
Seller shall be entitled to an earn-out payment with respect to such period (the
"2006 Earn-Out Payment") equal to a maximum of $324,000 if the sum of Buyer's
Net Income, Before Taxes for its 2006 fiscal year and its 2005 fiscal year
exceeds $850,000 (the "2006 Earn-Out Target"). If the 2006 Earn-Out Target is
not met, then Seller shall be entitled to a 2006 Earn-Out Payment equal to the
maximum potential 2006 Earn-Out Payment ($324,000), less the shortfall in the
2006 Earn-Out Target. The 2006 Earn-Out Payment shall be payable as follows:
one-half of the 2006 Earn-Out Payment actually earned by Seller, shall be
payable in cash (the maximum amount of cash payable to Seller shall be $162,000)
(the "Cash Portion of the 2006 Earn-Out Payment") and one-half of the 2006
Earn-Out Payment actually earned by Seller, shall be payable in shares of Xxxxx
common stock (the "Stock Portion of the 2006 Earn-Out Payment"), par value $.50
per share (the "Xxxxx Stock") (the maximum amount of Xxxxx Stock payable to
Seller hereunder shall be, in value (as determined herein) to $162,000). The
number of shares of Xxxxx Stock to be issued to Seller in payment of the Stock
Portion of the 2006 Earn-Out Payment shall be equal to the quotient obtained by
dividing the aggregate Stock Portion of the 2006 Earn-Out Payment to which
Seller shall be entitled to receive for such period by the average of the
closing sales price of the Xxxxx Stock (or the closing bid price, if no sales
were reported) as quoted on the Nasdaq National Market for the 20 trading days
immediately prior to the date of issuance of such shares of Xxxxx Stock
hereunder (which date of issuance shall be within 60 days of the end of Buyer's
2006 fiscal year). Payment of the Stock Portion of the 2006 Earn-Out Payment
payable hereunder, assumes the continuing accuracy and truthfulness of the
representations, warranties and covenants set out in Section 3.29 of this
Agreement, and the continued availability to Xxxxx of an exemption from
registration under the Securities Act for the issuance of the Xxxxx Stock to
Seller. In the event Seller shall be entitled to a Stock Portion of the 2006
Earn-Out Payment under this Section 2.3.1(c)(i), Seller shall be required to
confirm the accuracy and truthfulness of such representations, warranties and
covenants set out in Section 3.29 of this Agreement as of the date of issuance
of the Xxxxx Stock. In the event that Xxxxx determines, in Xxxxx' sole
discretion, that an exemption from registration under the Securities Act for the
issuance of the Xxxxx Stock to Seller is not available, Xxxxx may, at its
election and in its sole discretion, pay the Stock Portion of the 2006 Earn-Out
Payment in cash.
(ii) Additional Earn-Out.
(1) In addition to the Base Earn-Out, in the event
Buyer's Net Income, Before Taxes (as determined by Buyer within 45 days of
December 31 of its applicable fiscal year end) for its 2005 fiscal year, 2006
fiscal year, 2007 fiscal year, 2008 fiscal year and 2009 fiscal year exceeds the
Annual Target for the fiscal year, as set forth below, Seller shall be entitled
to an additional earn-out payment equal to 25% of such excess up to a maximum of
$40,000 for each such fiscal year.
Fiscal Year Annual Targets (#1)
----------- -------------------
2005 $120,000
2006 $420,000
2007 $620,000
2008 $680,000
2009 $740,000
For illustrative purposes only, in the event Buyer's Net Income, Before Taxes
for its 2006 fiscal year is $600,000, Seller shall be entitled to an additional
earn-out payment equal to $40,000. In the event Buyer's Net Income, Before Taxes
for its 2006 fiscal year is $450,000, Seller shall be entitled to an additional
earn-out payment equal to $7,500.
96
(2) In the event an Annual Target set forth in
subsection (ii)(1) above is not met for a fiscal year, Seller shall be entitled
to an additional earn-out payment equal to 25% of the excess over the Annual
Targets set forth below, up to a maximum of the total amount of the shortfall in
earn-out payments made pursuant to Section 2.3(c)(ii)(1) of this Agreement from
the prior fiscal year.
Fiscal Year Annual Targets (#2)
----------- -------------------
2006 $ 820,000
2007 $1,020,000
2008 $1,080,000
2009 $1,140,000
(d) Determination of Net Income, Before Taxes; Dispute Resolution.
(i) Buyer's Net Income, Before Taxes shall be determined by
Buyer within 45 days after December 31 of its applicable fiscal year end. Unless
within 30 days after its receipt of the Buyer's calculation of Buyer's Net
Income, Before Taxes Seller shall deliver to Buyer a reasonably detailed
statement describing its objections to such calculation (a "Statement of
Objection"), Buyer's calculation of Buyer's Net Income, Before Taxes shall be
final and binding.
(ii) If Seller delivers to Buyer a timely Statement of
Objection, Buyer shall have no obligation to pay any earn-out until such time as
the Seller's objections, as set forth in the Statement of Objection, are
resolved. Upon receipt of a timely Statement of Objection, Buyer and Seller and
their respective independent accountants shall negotiate in good faith and use
reasonable best efforts to resolve such dispute. If a resolution is reached,
such resolution shall be final and binding on the parties. If a final resolution
is not reached within 30 days after Seller has delivered its Statement of
Objection, any remaining disputes shall be resolved by a firm of independent
accountants selected jointly by the parties (the "Reviewing Accountants"). The
Reviewing Accountants shall be instructed to resolve any matters in dispute as
promptly as practicable, but in no event more than 30 days after such matters
have been submitted to them, and to set forth their resolution in a statement
(the "Accountant Statement") setting Buyer's Net Income, Before Taxes for the
disputed period. In such event, the determination of the Reviewing Accountants
shall be final and binding on the parties hereto and the Accountant Statement
shall be the Buyer's Net Income, Before Taxes for the disputed period for
purposes of calculating any earn-out. The fees and expenses of the Reviewing
Accountants shall be borne equally by Seller and Buyer.
3.4. Assumption of Liabilities. At and after the Closing, Buyer will
assume and pay as they become due or perform the Assumed Liabilities. Buyer
shall not assume, or become obligated to pay or perform under, any liability,
obligation or contract of Seller other than the Assumed Liabilities, provided
that Buyer shall be responsible for all liabilities incurred by Buyer in
connection with the operation of the Business following the Closing. Without
limiting the generality of the foregoing, Seller shall be solely responsible for
payment promptly when due of all amounts at any time owing by Seller with
respect to the Business of Seller, both before and after the Closing, whether
accrued or contingent, known or unknown, other than the Assumed Liabilities,
including, without limitation, liabilities arising out of the provision by
Seller of goods or services prior to the Closing, obligations for any of
Seller's Taxes; provided, that Seller shall not be liable for any occurrences or
events arising in connection with Buyer's operation of the Business following
Closing. Seller agrees that it will, forthwith after receipt, transfer and
deliver to Buyer any mail or other documents received by Seller relating to any
of the Assumed Liabilities transferred to Buyer hereunder, such mail and
documents to be delivered in the form and condition in which received, except
for the opening of any envelope or package.
3.5. Allocation of Purchase Price. The Purchase Price shall be allocated
among the Purchased Assets in the manner set forth on Exhibit B. Such allocation
constitutes a good faith allocation in accordance with the requirements of
Section 1060 of the Code. Buyer and Seller shall not take any position
inconsistent with such allocation for the purposes of any tax return of any
kind, whether federal, state or local, filed by or on behalf of either of them
or by or on behalf of any of their Affiliates.
97
3.6. Closing Deliveries; Further Assurances. The transfer of the Purchased
Assets to be transferred by Seller to Buyer at the Closing shall be effected by
deeds, bills of sale, assignments and consents thereto and such other
instruments of transfer and conveyance as shall transfer to Buyer full title to
the Purchased Assets free and clear of all Liens whatsoever, all of which
documents shall be in form and substance reasonably satisfactory to counsel to
Buyer and duly executed by or on behalf of Seller. At the Closing, Buyer shall
deliver to Seller an instrument of assumption with respect to the Assumed
Liabilities in form and substance reasonably satisfactory to counsel to Seller.
Seller shall, at Buyer's request, at any time and from time to time after the
Closing Date, do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances and assurances as may be reasonably required for the
better assigning, transferring, granting, conveying, assuring and confirming to
Buyer, or to its successors and assigns, or for aiding and assisting in the
collecting and reducing to possession of, any or all of the Purchased Assets.
3.7. Expenses. Except as otherwise expressly set forth herein, each party
hereto shall pay its own expenses, fees and charges (including attorneys' fees
and accountants' fees) in connection with the preparation and negotiation of
this Agreement and the consummation of the transactions contemplated hereby.
3.8. Payment of Taxes. Seller shall make all required reports and pay
directly to each and every taxing authority any and all Taxes, fees and
assessments, including applicable transfer taxes, plus any penalty or interest
thereon, that arise as a result of the sale of the Purchased Assets by Seller to
Buyer under this Agreement; provided, however, Buyer shall pay the sales tax due
on the sale of the furniture, fixtures and equipment constituting the Purchased
Assets as identified on Exhibit B.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLER, THE SHAREHOLDER AND XXXXX
Seller, Shareholder and Xxxxx jointly and severally represent and warrant
to Buyer as follows:
4.1. Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Seller is duly qualified or licensed to do business as a foreign
corporation and is in good standing in all of the states and other jurisdictions
listed on Schedule 4.1 to this Agreement, which constitute all states and other
jurisdictions where the nature of the activities conducted by Seller makes such
qualification or licensing necessary. Seller has all requisite corporate power
and authority to own, operate and lease its properties and to carry on its
business, including the Business, as it is currently conducted. True and
complete copies of Seller's certificate of incorporation and bylaws have been
delivered to Buyer, each so delivered being in full force and effect and as
amended to the date hereof ("Seller's Certificate of Incorporation" and
"Seller's Bylaws", respectively).
4.2. Capitalization; Subsidiaries.
4.2.1. The authorized capital stock of Seller consists of 200 shares
of common stock, no par value per share ("Seller's Capital Stock"), of
which 100 shares are issued and outstanding, all of which are owned by
Shareholder. Shareholder is and will be on the Closing Date the sole
record and beneficial owner and holder of the shares of Seller's Capital
Stock owned by it, free and clear of all Liens. All of the outstanding
shares of Seller's Capital Stock are duly authorized, validly issued,
fully paid and nonassessable. None of the outstanding shares of Seller's
Capital Stock have been issued in violation of Seller's Certificate of
Incorporation or Seller's Bylaws or in violation of any preemptive rights
or rights of first refusal under any provision of applicable law, Seller's
Certificate of Incorporation or Seller's Bylaws, or any contracts or
agreements to which Seller is subject, bound or a party. There are no
outstanding warrants, options, rights, "phantom" stock rights, agreements,
convertible or exchangeable securities, pre-emptive rights or agreements,
instruments, understandings or other commitments relating to the issuance,
sale or transfer of any of Seller's Capital Stock or other securities of
Seller.
4.2.2. The authorized capital stock of the Shareholder consists of
200 shares of common stock, no par value per share ("Shareholder's Capital
Stock"), of which 100 shares are issued and
98
outstanding, all of which are owned by Xxxxx. Xxxxx is and will be on the
Closing Date the sole record and beneficial owner and holder of the shares
of Shareholder's Capital Stock owned by it, free and clear of all Liens.
All of the outstanding shares of Shareholder's Capital Stock are duly
authorized, validly issued, fully paid and nonassessable. None of the
outstanding shares of Shareholder's Capital Stock have been issued in
violation of the Shareholder's Certificate of Incorporation or the
Shareholder's Bylaws or in violation of any preemptive rights or rights of
first refusal under any provision of applicable law, the Shareholder's
Certificate of Incorporation or the Shareholder's Bylaws, or any contracts
or agreements to which the Shareholder is subject, bound or a party. There
are no outstanding warrants, options, rights, "phantom" stock rights,
agreements, convertible or exchangeable securities, pre-emptive rights or
agreements, instruments, understandings or other commitments relating to
the issuance, sale or transfer of any of Shareholder's Capital Stock or
other securities of Shareholder.
4.2.3. Seller does not, directly or indirectly, own any capital
stock of or other equity interests in any corporation, partnership, joint
venture or similar entity.
4.3. Authorization.
4.3.1. Seller has all requisite corporate power and authority to
execute, deliver and perform this Agreement and the Ancillary Agreements
to which Seller is to be a party and to consummate the transactions
contemplated herein or therein. The board of directors of Seller and
Shareholder have approved Seller's execution, delivery and performance of
this Agreement and of each Ancillary Agreement to which Seller is to be a
party. Seller has duly executed and delivered this Agreement and each
Ancillary Agreement to which it is to be a party, and this Agreement and
each Ancillary Agreement to which it is a party constitute Seller's legal,
valid and binding obligation, enforceable against Seller in accordance
with its terms (subject to applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or similar laws affecting creditors'
rights generally and to general equitable principles).
4.3.2. Shareholder has all requisite corporate power and authority
to execute, deliver and perform this Agreement and the Ancillary
Agreements to which Shareholder is to be a party and to consummate the
transactions contemplated herein or therein. The board of directors of
Shareholder and Xxxxx have approved Shareholder's execution, delivery and
performance of this Agreement and each Ancillary Agreement to which
Shareholder is to be a party. Shareholder has duly executed and delivered
this Agreement and each Ancillary Agreement to which it is to be a party,
and this Agreement and each Ancillary Agreement to which it is a party
constitute Shareholder's legal, valid and binding obligation, enforceable
against Shareholder in accordance with its terms (subject to applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer or
similar laws affecting creditors' rights generally and to general
equitable principles).
4.3.3. Xxxxx has the requisite authority and capacity to execute,
deliver and perform this Agreement and each of the Ancillary Agreements to
which Xxxxx is to be a party and to consummate the transactions
contemplated herein or therein. Xxxxx has duly executed and delivered this
Agreement and each Ancillary Agreement to which Xxxxx is a party, and this
Agreement and each Ancillary Agreement to which Xxxxx is a party
constitute Xxxxx'x legal, valid and binding obligation, enforceable
against Xxxxx in accordance with its terms (subject to applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer or
similar laws affecting creditors' rights generally and to general
equitable principles).
4.4. Conflicting Agreements; Liens.
4.4.1. Seller's execution, delivery and performance of this
Agreement and the Ancillary Agreements to which Seller is to be a party,
and the consummation of the transactions contemplated hereby or thereby,
do not and will not, with notice, lapse of time, or both (a) violate or
conflict with any of the terms, conditions or provisions of Seller's
Certificate of Incorporation or Seller's Bylaws; (b) violate any statute,
rule, regulation, order or decree of any Governmental Entity applicable to
Seller or by which any of the Purchased Assets may be bound; or (c)
conflict with, result in a breach of, give rise to a default under, or
99
give to others any right of termination, cancellation, modification or
acceleration under any of the terms, conditions or provisions of, any
Assumed Contract, or any Lien, Lease, agreement or instrument to which
Seller is a party or by which Seller or any of the Purchased Assets may be
bound, and will not result in a declaration or imposition of any Lien of
any nature whatsoever upon any of the Purchased Assets.
4.4.2. Shareholder's execution, delivery and performance of this
Agreement and the Ancillary Agreements to which Shareholder is to be a
party, and the consummation of the transactions contemplated hereby or
thereby, do not and will not, with notice, lapse of time, or both (a)
violate or conflict with any of the terms, conditions or provisions of
Shareholder's certificate of incorporation or Shareholder's bylaws; (b)
violate any statute, rule, regulation, order or decree of any Governmental
Entity applicable to Shareholder or by which any of the Purchased Assets
may be bound; or (c) conflict with, result in a breach of, give rise to a
default under, or give to others any right of termination, cancellation,
modification or acceleration under any of the terms, conditions or
provisions of, any Assumed Contract, or any Lien, Lease, agreement or
instrument to which Shareholder is a party or by which Shareholder or any
of the Purchased Assets may be bound, and will not result in a declaration
or imposition of any Lien of any nature whatsoever upon any of the
Purchased Assets.
4.4.3. The execution, delivery and performance of this Agreement and
the Ancillary Agreements to which Xxxxx is to be a party by Xxxxx, and the
consummation of the transactions contemplated hereby or thereby, does not
and will not, with notice, lapse of time, or both (a) violate any statute,
rule, regulation, order or decree of any Governmental Entity applicable to
Xxxxx or by which the Purchased Assets or Personal Goodwill may be bound;
or (b) conflict with, result in a breach of, give rise to a default under,
or give to others any right of termination, cancellation, modification or
acceleration under any of the terms, conditions or provisions of, any
Lien, Lease, agreement or instrument to which Xxxxx is a party or by which
Xxxxx or any of the Purchased Assets or Personal Goodwill may be bound,
and will not result in a declaration or imposition of any Lien of any
nature whatsoever upon the Purchased Assets or the Personal Goodwill.
4.5. Third Party Consents. No notice to, consent, authorization, license,
Permit, registration or approval of, or exemption or other action by,
Shareholder, Xxxxx or any Person or Governmental Entity is required in
connection with the execution, delivery or performance of this Agreement by
Seller or the consummation by Seller of the transactions contemplated hereby.
4.6. Financial Statements. Seller has delivered to Buyer the following
financial statements, including the notes thereto (collectively, the "Financial
Statements"): (a) the audited balance sheet of Seller at December 31, 2003 (the
"Balance Sheet Date"), and related audited statements of income and cash flow
for the twelve (12) month period then ended; and (b) an unaudited balance sheet
of Seller at September 30, 2004, and related unaudited statements of income and
cash flow for the nine (9) month period then ended. The Financial Statements are
complete and correct, are in accordance with all books, records and accounts of
Seller, have been prepared in accordance with GAAP with respect to the periods
indicated, and fairly and adequately present the financial condition of Seller
as of the respective dates thereof and the results of its operations and cash
flows for the respective periods covered thereby.
4.7. No Undisclosed Liabilities. As of the Balance Sheet Date, Seller had
no claims, liabilities or indebtedness of any nature, whether absolute, accrued,
contingent or otherwise, other than liabilities disclosed or reserved against in
the Financial Statements. Since the Balance Sheet Date, Seller has not incurred
any claims, liabilities or indebtedness of any nature, whether absolute,
accrued, contingent or otherwise, other than liabilities disclosed or reserved
against in the Financial Statements or incurred in the ordinary course of
business and consistent with past practices, and which are properly reflected or
reserved against in a balance sheet prepared in accordance with GAAP.
4.8. Title to Purchased Assets. Seller has good and marketable title to
all of the Purchased Assets, free and clear of all Liens, and at the Closing
Seller will convey to Buyer, good and marketable title to all of the Purchased
Assets, free and clear of all Liens.
100
4.9. Condition of Purchased Assets. The Operating Assets are in good
repair and operating condition, reasonable wear and tear excepted, and are
suitable to be used for their intended purpose in connection with the Business.
Seller, Shareholder and Xxxxx have no knowledge that the Equipment is not in
good repair and operating condition, reasonable wear and tear excepted, or that
the Equipment is not suitable to be used for its intended purpose in connection
with the Business. Seller has taken all steps necessary to preserve the
confidential nature of all proprietary and confidential information relating to
the Business.
4.10. Equipment Leases.
4.10.1. The Equipments Leases arise from the bona fide lease, sale
or financing of the Equipment relating to such Equipment Leases and have
been originated or purchased by Seller in the ordinary course of business
and consistent with past practice. Except as set forth on Schedule 3.10.1
to this Agreement, no lessee under any of the Equipment Leases has given
notice of termination, has threatened to terminate, or has provided a
notice of non-renewal of any Equipment Lease.
4.10.2. Each Equipment Lease is a legal, valid and binding
obligation of the parties thereto, enforceable in accordance with its
terms.
4.10.3. No Equipment Lease was entered into for personal, family or
household purposes and no Equipment Lease is a consumer lease as defined
in Article 2A of the UCC.
4.10.4. Each Equipment Lease and the other related documents in the
Business Information and Records of Seller accurately reflect the
agreements between the parties thereto with respect to such Equipment
Lease.
4.10.5. Except as set forth on Schedule 3.10.5 to this Agreement, no
Equipment Lease requires the prior written consent of the lessee thereto,
or contains any other restriction on the ability of Seller, to transfer or
assign such Equipment Lease to Buyer as contemplated by this Agreement.
4.10.6. Except as set forth on Schedule 3.10.6 to this Agreement,
Seller has a first priority perfected security interest in the Equipment
relating to each Equipment Lease, free and clear of all Liens, except the
interests of the lessee thereunder.
4.10.7. Except as set forth on Schedule 3.10.7 to this Agreement,
none of the Equipment Leases permit the lessee thereunder to transfer
lessee's interest therein to a third party, or the sale, assignment, or
transfer of the Equipment subject to the Equipment Lease, without the
prior written consent of Seller.
4.10.8. Except as set forth on Schedule 3.10.8 to this Agreement,
none of the Equipment Leases are delinquent in payments thereunder and no
event of default has occurred or is continuing under any of the Equipment
Leases.
4.10.9. Schedule 3.10.9 to this Agreement contains a complete list
of all Equipment Leases that: (a) have a net book value of more than
$10,000, (b) had or has Equipment that was abandoned, or lost, or (c) had
Equipment that is subject to an active proceeding for reclamation,
replevin, attachment, or other similar proceeding.
4.10.10. Each Equipment Lease, including each Equipment Lease under
which the lessee is a Governmental Entity, and Seller's performance
thereunder complies with all laws applicable to such Equipment Lease, and
Seller has not received any notice of violation of any law relating to any
Equipment Lease.
4.10.11. The terms of each Equipment Lease provides that the lessee
thereunder is responsible: (a) for the maintenance and repair of the
Equipment, (b) for the maintenance of adequate
101
casualty and property insurance on the Equipment and for the payment of
the premiums for such insurance, and (c) for the payment of all taxes due
and owing which arise under the Equipment Lease.
4.10.12. Except as otherwise set forth on Schedule 3.10.12 to this
Agreement, the payment and performance obligations of each lessee under an
Equipment Lease are fully guaranteed, each such guaranty is in full force
and effect and each such guaranty is a legal, valid and binding obligation
of the guarantor therein and/or thereunder, enforceable in accordance with
its terms.
4.10.13. True and complete copies of all Equipment Leases, and all
other documents in the Business Information and Records of Seller relating
to such Equipment Leases, have been provided to Buyer. Additionally,
Seller has provided to Buyer a true and complete copy of each standard
form or form of Equipment Lease used by Seller in the past 5 years.
4.11. Absence of Changes. Since the Balance Sheet Date there has not been:
4.11.1. Any change in the Business, results of operations, earnings,
backlog, prospects, properties, assets, liabilities or condition,
financial or otherwise, of Seller (including without limitation the loss
of any customer or supplier or the cancellation of any order or Equipment
Lease) other than changes in the ordinary course of business, none of
which, singly or in the aggregate, has had or could reasonably be expected
to have a Material Adverse Effect.
4.11.2. Any damage, destruction or loss with respect to any
Purchased Asset (whether or not covered by insurance) which has had or is
reasonably likely to have a Material Adverse Effect.
4.11.3. Except in the ordinary course of business and consistent
with past practice, for full and fair value received, any sale, lease,
license, mortgage, assignment, transfer or other disposition or imposition
of a Lien upon any tangible or intangible asset used or useful in the
Business; or any acquisition by Seller of any business, property or assets
other than in the ordinary course of business and consistent with past
practices.
4.11.4. Any capital expenditure or commitment to make a capital
expenditure relating to the Purchased Assets.
4.11.5. Any amendment, cancellation, termination or waiver of any
Permit, contract right or other right relating to the Business under any
contract or agreement.
4.11.6. Any material change in the Business or commercial practices
customarily followed by Seller.
4.11.7. Any adoption or authorization of a plan of complete or
partial liquidation of Seller or the Business.
4.11.8. Any change in the accounting practices, procedures or
methods of Seller, except as may be required by GAAP.
4.11.9. Any declaration, set-aside or payment of any dividend
(whether in cash, property or securities).
4.11.10. Any resignation or threatened resignation of any employee
or officer of Seller.
4.11.11. Any commencement, settlement, judgment or other resolution
of any litigation relating to the Business or the Purchased Assets.
102
4.11.12. Any increase in or establishment of any bonus, severance,
pension, profit-sharing, stock option or other employee benefit plan or
compensation payable or to become payable to any employee of Seller, or
any recognition or certification of a labor union or collective bargaining
unit with respect to any employees of Seller.
4.12. Contracts and Agreements. Schedule 3.12 to this Agreement lists
every agreement and contract, other than the Equipment Leases, to which Seller
is a party or by which its property or assets may be bound and which is not
terminable by Seller without the payment of a penalty or other consequence upon
not more than 30 days notice, that:
4.12.1. Is material to the continued operation of the Business.
4.12.2. Involves the future payment or receipt of more than $10,000
per year or $25,000 in the aggregate.
4.12.3. Relates to the borrowing of money or the extension of
credit, including any guarantee of any obligation thereunder or the pledge
of any assets or security therefor.
4.12.4. Involves the leasing of Equipment to a Governmental Entity.
4.12.5. Involves the purchase, sale or lease of any Operating Assets
or other personal property used or useful in the operation of the
Business.
4.12.6. Is with an agent, consultant, advisor, broker, salesman,
sales representative, distributor, sales agent or dealer.
4.12.7. Relates to any Intellectual Property, including all license
agreements (whether Seller is licensee or licensor thereunder).
4.12.8. Is a joint venture, partnership, or debt or equity
investment agreement.
4.12.9. Is a tolling agreement.
4.12.10. Is with any Affiliate of Seller.
4.12.11. Relates to any purchase or sale of fixed assets or any
sale, assignment, transfer or other disposition of any contract right,
Permit or intangible asset.
4.12.12. Restricts in any way the right of Seller to compete with
any person or entity in any line of business.
4.12.13. Was otherwise not made in the ordinary course of business
consistent with past practice.
Such contracts and agreements are collectively referred to herein as the
"Material Contracts". True, correct and complete copies of all Material
Contracts referred to in this Section 3.12 (including all amendments and
modifications thereto) and, in the case of oral contracts and agreements,
accurate descriptions of the material terms thereof, have been provided to
Buyer. All such Material Contracts are valid, enforceable and in full force and
effect. Neither Seller nor, to Seller's knowledge, any third party to any
Material Contract is in breach or default thereunder, and, to Seller's
knowledge, no event has occurred that, with the giving of notice or the passage
of time or both, would constitute a default thereunder.
4.13. Permits. Seller has all Permits as are necessary to enable Buyer to
conduct the Business following the Closing. All such Permits are listed on
Schedule 3.13 to this Agreement and are in full force and
103
effect. No violations have occurred or are continuing in respect of any such
Permit and no proceeding is pending, or to Seller's knowledge, threatened, that
may cause the revocation or limitation of any such Permit. All such Permits are
assignable without consent of the other party or parties thereto and none of the
Permits will be modified, subject to termination or otherwise affected by
assignment to Buyer or by consummation of the transactions contemplated by this
Agreement.
4.14. Compliance with Laws. Seller is not in violation of any applicable
law, regulation, order, judgment or decree affecting the Business or the
Purchased Assets promulgated or issued by any Governmental Entity which
violation or the correction of which could reasonably be expected to have a
Material Adverse Effect. Seller has not received any notice of an alleged
violation of any law, regulation, order, judgment or decree affecting the
Business or the Purchased Assets. There is no law, regulation, order, judgment
or decree outstanding and affecting the Business or the Purchased Assets that
requires or will require, from and after Closing, a change in the manner of
conducting the Business or increased expenditures by or on behalf of the
Business. No proceeding or investigation by any Governmental Entity is pending
or, to Seller's knowledge, threatened.
4.15. Transferred Deposit.The aggregate amount of $177,862 allocated and
deposited in the Transferred Deposit account represents the aggregate amount of
security deposits collected by Seller in connection with and under the Equipment
Leases transferred to Buyer at Closing as Purchased Assets.
4.16. Taxes. Seller has filed or caused to be filed on a timely basis all
Tax Returns with respect to Taxes that are or were required to be filed pursuant
to applicable law. All Tax Returns filed by Seller are true, correct and
complete. Seller has paid, or made provision for the payment of, all Taxes that
have or may become due for all periods covered by the Tax Returns or otherwise,
or pursuant to any assessment received by Seller, except such Taxes, if any, as
are being contested in good faith and as to which adequate reserves (determined
in accordance with GAAP) have been provided in the unaudited balance sheet of
Seller at September 30, 2004. Seller currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has ever been
made or is expected to be made by any Governmental Entity in a jurisdiction
where Seller does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no unpaid Taxes or assessments that are or could
become a Lien on the Purchased Assets or the Purchase Price. All Taxes that
Seller is or was required by applicable law to withhold, deduct or collect have
been duly withheld, deducted and collected and, to the extent required, have
been paid to the proper Governmental Entity or other Person. Seller has
delivered to Buyer true and correct copies of all of Seller's federal, state and
local Tax Returns for the past three (3) tax years.
4.17. Litigation. Except as set forth on Schedule 3.17 to this Agreement,
there is no legal action, suit, claim or controversy (including without
limitation with respect to product liability and warranties, employee matters
and environmental matters) pending or, to Seller's knowledge, threatened against
Seller or involving the Business or any of the Purchased Assets, or that
questions the validity of this Agreement or seeks to delay, prohibit or enjoin
or otherwise challenge the transactions contemplated hereby.
4.18. Leases. Seller owns fee simple title to no real property. The leases
listed and described on Schedule 3.18 to this Agreement constitute all Leased
Real Estate and all leases under which any Operating Asset is leased, used,
occupied or held by Seller and used in connection with the Business (the
"Leases"). True, correct and complete copies of all of the Leases (including all
amendments and modifications thereto) have been delivered to Buyer. Except as
otherwise set forth on Schedule 3.18 to this Agreement, the Leases are valid,
enforceable and in full force and effect and will not be modified, subject to
termination or otherwise affected by assignment to Buyer or by consummation of
the transactions contemplated by this Agreement. Neither Seller nor, to Seller's
knowledge, any other party to any Lease is in default thereunder, and no event
has occurred that, with the giving of notice or the passage of time or both,
would constitute a default thereunder.
4.19. Benefit Plans. Schedule 3.19 to this Agreement contains a true,
correct and complete list of all of the following contracts, plans and policies
to which Seller is a party or by which its property or assets may be bound:
104
4.19.1. Contracts with officers and employees relating to employment
or severance, other than any contract that is terminable by Seller at will
without penalty or other consequence;
4.19.2. Collective bargaining agreements, union contracts, labor
agreements, conciliation agreements or contracts with any labor union or
other representative of employees;
4.19.3. Pension, profit-sharing, bonus, commission, retirement,
stock option, other employee benefit or welfare plans or other similar
plans or arrangements; and
4.19.4. Published employment policies.
Seller has furnished to Buyer true and complete copies of all contracts,
plans and policies referred to on Schedule 3.19 to this Agreement. No officer or
employee of Seller will be entitled to any additional benefits or any
acceleration of the time of payment or the vesting of benefits as a result of
the transactions contemplated by this Agreement.
4.20. ERISA Compliance.
4.20.1. No corporation or other entity is a member with Seller of a
controlled group of corporations as defined in Section 414(b) of the Code,
or is under common control with Seller as defined in Section 414(c) of the
Code.
4.20.2. No employee benefit plan maintained by Seller is a
"multiemployer plan" as defined in Section 3(37)(A) of ERISA.
4.20.3. Seller has not terminated any plan that is an "employee
pension benefit plan" as described in Section 3(2) of ERISA, and no
condition presently exists that could result in such termination under
Section 4042 of ERISA.
4.20.4. No "reportable event" (as defined in Section 4043 of ERISA)
has occurred with respect to an employee pension benefit plan maintained
by Seller for which notice to the Pension Benefit Guaranty Corporation is
required pursuant to regulations under Section 4043 of ERISA.
4.20.5. Seller has not engaged in any "prohibited transaction" as
defined in Section 406 of ERISA (other than a prohibited transaction that
is exempt under Section 407 or 408 of ERISA).
4.20.6. No employee, officer or director of Seller, or any person
for whom Seller is directly or indirectly responsible, whether by way of
indemnity or otherwise, has engaged in a prohibited transaction (other
than a prohibited transaction that is exempt under Section 407 or 408 of
ERISA).
4.20.7. Seller has complied in all material respects with the
reporting and disclosure requirements of Part I of ERISA.
4.20.8. There is no accumulated funding deficiency as defined in
Section 412 of the Code with respect to any employee benefit plan
maintained by Seller. All contributions required to have been made to such
employee benefit plans have been timely made.
4.21. Employee Relations. Schedule 3.21 to this Agreement lists each
employee of Seller and such employee's years of service, age, salary and
position. Seller maintains satisfactory relations with its employees. There have
been no labor controversies and no strikes, lockouts, work stoppages or work
slowdowns or threats thereof with respect to any group of employees of Seller
during the past three (3) years, and Seller has not received notice of or
otherwise become aware of any effort to organize its employees into a collective
bargaining unit during the past three (3) years. No claim has been asserted or,
to Seller's knowledge, threatened
105
by an employee on account of any alleged violation by Seller of any law relating
to employment discrimination or employment practices.
4.22. Intellectual Property. Seller owns (or possesses adequate licenses
or other rights to use, with or without payment of royalties) all Intellectual
Property necessary to carry on the Business as it is now conducted. Schedule
4.22 to this Agreement contains a list and a brief description (including, if
applicable, date of application, filing or registration and registration or
application number) of all items of Intellectual Property, and no such filing,
registration or application has been canceled or abandoned or has expired.
Subject to the license agreements identified on Schedule 3.22 to this Agreement,
Seller has the right to use all of the Intellectual Property free and clear of
all Liens and, after the Closing, Buyer will have the right to use the
Intellectual Property free and clear of all Liens. There is no settlement,
forbearance, consent or order to which Seller is a party which restricts
Seller's right to use or transfer any Intellectual Property or which permits any
third party to use any Intellectual Property (other than the license agreements
identified on Schedule 3.22 to this Agreement). Seller has not infringed and is
not infringing, and has not engaged and is not engaging in the unauthorized use
or misappropriation of, any patent, copyright, trademark, service xxxx, trade
name, process, design, computer software, invention, trade secret, know-how,
technology or similar proprietary right owned or controlled by any third party.
There is no pending or, to Seller's knowledge, threatened, claim, action or
proceeding against Seller relating to any such infringement, unauthorized use or
misappropriation.
4.23. Solvency.
4.23.1. Seller is not now insolvent and will not be rendered
insolvent by the consummation of the transactions contemplated by this
Agreement. As used in this section, "insolvent" means that the sum of the
debts and other liabilities of Seller exceeds the present fair saleable
value of Seller's assets.
4.23.2. Immediately after giving effect to the consummation of the
transactions contemplated by this Agreement: (i) Seller will be able to
pay its liabilities as they become due in the ordinary course of its
business; (ii) Seller will not have unreasonably small capital with which
to conduct its present or proposed business; (iii) Seller will have assets
(calculated at fair market value) that exceed its liabilities; and (iv)
taking into account all pending and threatened litigation, final judgments
against Seller in actions for money damages are not reasonably anticipated
to be rendered at a time when, or in amounts such that, Seller will be
unable to satisfy any such judgments promptly in accordance with their
terms (taking into account the maximum probable amount of such judgments
in any such actions and the earliest reasonable time at which such
judgments might be rendered) as well as all other obligations of Seller.
The cash available to Seller, after taking into account all other
anticipated uses of the cash, will be sufficient to pay all such debts and
judgments promptly in accordance with their terms
4.24. No Finder. Seller has not paid, or become obligated to pay, any fee
or commission to any broker, finder or intermediary for or on account of the
transactions contemplated hereby.
4.25. Assets of Business. Except for the Excluded Assets, the Purchased
Assets and Personal Goodwill (a) constitute all of the assets, tangible and
intangible, of any nature whatsoever, necessary to operate the Business in the
manner presently operated by Seller and (b) include all of the assets presently
used by Seller in connection with the operation of the Business.
4.26. Hazardous Substances.
4.26.1. Seller, Shareholder or Xxxxx, have no knowledge that there
is now, or has ever been, any disposal, release or threatened release of
Hazardous Materials on, from or under any Leased Real Estate or any real
property previously owned or leased by Seller that may (a) give rise to a
clean-up responsibility, personal injury liability or property damage
claim against Seller or Buyer, (b) result in Seller or Buyer being named a
potentially responsible party for any clean up-costs, personal injuries or
property damage, or (c) give rise to any cause of action by any third
party against Seller or Buyer. For purposes of this
106
Section 4.26, the terms "disposal," "release," and "threatened release"
shall have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended.
4.26.2. Seller, Shareholder or Xxxxx have no knowledge that any of
the Leased Real Estate or any real property previously owned or leased by
Seller is in violation of any law relating to industrial hygiene or to the
environmental conditions on, under or about such properties, including,
without limitation, soil and ground water condition, and to the actual
knowledge of Seller, Shareholder or Xxxxx, without independent inquiry,
there are no underground tanks or related piping, conduits or related
structures existing on, under or about the Leased Real Estate or any real
property previously owned or leased by Seller. During the period of
Seller's ownership or lease of the Leased Real Estate or such other real
property, neither Seller nor any third party has used, generated,
manufactured, treated or stored on, under or about such properties or
transported to or from such properties any Hazardous Materials.
4.26.3. During the period of Seller's ownership or lease of the
Leased Real Estate or such other real property, there has been no action,
suit, demand, claim, notice or noncompliance or violation, notice of
liability, investigation, order or decree brought or delivered or, to
Seller's knowledge, threatened against Seller or any settlement or consent
decree reached by Seller with any third party or third parties alleging
the presence, disposal, release or threatened release of any Hazardous
Materials on, from or under any of such properties.
4.26.4. Seller has delivered to Buyer true and complete copies of
all environmental reports, studies, surveys or analyses in its possession
or under its control relating to the Leased Real Estate or to any other
real property previously owned or leased by Seller.
4.27. Insurance. Seller has in full force and effect the policies of
liability, errors and omissions and other forms of insurance relating to the
Business listed on Schedule 4.27 to this Agreement. Seller is not in default
under any such policy and there is no material inaccuracy in any application
relating to any such policy. Seller has not received a notice of cancellation or
non-renewal with respect to any such policy. There are no pending claims under
any such policy.
4.28. Disclosure. None of the information included in this Agreement or in
any other written document furnished or to be furnished by Seller pursuant to
this Agreement is false or misleading in any material respect or omits to state
a fact necessary in order to make any of the statements made herein or therein
not misleading in any material respect. There is no fact or condition the
occurrence or existence of which has had or could reasonably be expected to have
a Material Adverse Effect that has not been set forth or referred to in this
Agreement.
4.29. Warranties relating to Acquisition of Xxxxx Stock.
4.29.1. Each of Seller, Shareholder and Xxxxx, by reason of its or
his business and financial experience, has such knowledge, sophistication
and experience in financial and business matters and in making investment
decisions of this type that each of Seller, Shareholder and Xxxxx is
capable of (i) evaluating the merits and risks of an investment in the
Xxxxx Stock and making an informed investment decision and (ii) bearing
the economic risk of such investment. Prior to the Closing Date, each of
Seller, Shareholder and Xxxxx has received from Buyer, and had an
opportunity to review, copies of: (a) Xxxxx' annual report on Form 10-K
for its fiscal year ended December 31, 2003; (b) Xxxxx' proxy statement
dated March 22, 2004 relating to Xxxxx' 2004 annual meeting of
shareholders to be held on April 20, 2004, and (c) such other reports and
documents required to be filed and filed by Xxxxx with the SEC under
Sections 13(a), 14(a), 14(c) and 15(d) of the Securities Exchange Act of
1934, as amended, since the filing of its Form 10-K for its fiscal year
ended December 31, 2003 with the SEC, specifically Xxxxx': (1) Form 10-Q
for the quarterly period ended March 31, 2004; (2) Form 10-Q for the
quarterly period ended June 30, 2004; (3) Form 8-K dated September 27,
2004; (4) Form 8-K dated October 1, 2004; and (5) Form 10-Q for the
quarterly period ended September 30, 2004. Seller is acquiring the Xxxxx
Stock for investment for its own
107
account, not as a nominee or agent and not with the view to, or any
intention of, a resale or distribution thereof, in whole or in part, or
the grant of any participation therein.
4.29.2. Seller understands that the Xxxxx Stock are "restricted
securities" under the federal securities laws inasmuch as the Xxxxx Stock
are being acquired from Xxxxx in a transaction not involving a public
offering and that under such laws and applicable regulations such
securities may not be resold, transferred or otherwise disposed of without
registration under the Securities Act and under applicable state
securities laws or an exemption therefrom, and that in the absence of an
effective registration statement covering the Xxxxx Stock or an available
exemption from such registration, the Xxxxx Stock must be held
indefinitely. In this connection, Seller represents that it is familiar
with Rule 144 promulgated under the Securities Act and understands the
resale limitations imposed thereby and by the Securities Act. Seller
represents that, in the absence of an effective registration statement
covering the Xxxxx Stock, it will not offer, sell or otherwise transfer
the Xxxxx Stock except pursuant to an effective registration statement
under the Securities Act covering the Xxxxx Stock, or pursuant to an
exemption from the registration requirements of the Securities Act and
applicable state securities laws. Seller understands that for the sole
purpose of enforcing the Securities Act as hereafter defined, Xxxxx may
place stop transfer instructions against the Xxxxx Stock and the
certificates therefor to restrict the transfer thereof. Seller understands
that a legend, in substantially the form as that set forth below, will be
placed on any certificate or certificates evidencing the Xxxxx Stock:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws, and may not be offered, sold or
otherwise transferred under the Securities Act, except pursuant to
an effective registration statement under the Securities Act and
applicable state securities laws covering the securities, or
pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws."
Such legend shall be immediately removed upon the effectiveness of any
registration statement regarding the Xxxxx Stock, but may be replaced by any
other applicable legend reflecting any legal restriction related to such Xxxxx
Stock such as a legal restriction related to transfers of Xxxxx Stock by a then
"affiliate" (as defined in Rule 144(a)(1) of the Securities Act) of Xxxxx.
Seller understands that Xxxxx is under no obligation to register the Xxxxx
Stock under the Securities Act or any applicable state securities laws or to
require Xxxxx to assist Seller in determining or establishing exemptions from
such registration requirements. As a result, Seller understands it may be unable
to liquidate its investment in case of an emergency or a change in
circumstances.
Seller hereby acknowledges that because of the restrictions on transfer of
the Xxxxx Stock to be issued in connection with this Agreement it may have to
bear the economic risk of the investment commitment in the Xxxxx Stock for an
indefinite period of time. Seller will observe and comply with the Securities
Act and the rules and regulations promulgated thereunder, as now in effect and
as from time to time amended, in connection with any offer, sale, pledge,
transfer or other disposition of the Xxxxx Stock.
4.29.3. Each of Seller, Shareholder and Xxxxx understands that an
investment in the Xxxxx Stock involves substantial risks. Each of Seller,
Shareholder and Xxxxx has been given the opportunity to make a thorough
investigation of the proposed activities of Xxxxx and, upon request to
Xxxxx, has been furnished with materials relating to Xxxxx and its
proposed activities to the extent such information is publicly available.
Each of Seller, Shareholder and Xxxxx has had an opportunity to ask
questions of and receive answers from Xxxxx, or from a Person or Persons
acting on Xxxxx' behalf, concerning the terms and conditions of the
Seller's investment in the Xxxxx Stock. Seller has relied upon, and is
making its investment decision upon, the reports, schedules, forms,
statements and other documents filed with the SEC by Xxxxx, and other
information publicly available about Xxxxx.
108
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller, Shareholder and Xxxxx as follows:
5.1. Organization. Buyer is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Buyer has all
requisite corporate power and authority to own, operate and lease its property
and to carry on its business as it is currently conducted.
5.2. Authorization. Buyer has all requisite corporate power and authority
to execute, deliver and perform this Agreement and the Ancillary Agreements to
which Buyer is to be a party and to consummate the transactions contemplated
herein or therein. Buyer has taken all corporate action required to authorize
the execution, delivery and performance of this Agreement and each Ancillary
Agreement to which Buyer is to be a party. Buyer has duly executed and delivered
this Agreement and each Ancillary Agreement to which it is a party, and this
Agreement and each Ancillary Agreement to which it is a party constitute Buyer's
legal, valid and binding obligation, enforceable against Buyer in accordance
with its terms (subject to applicable bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or similar laws affecting creditors' rights
generally and to general equitable principles).
5.3. Conflicting Agreements; Liens. The execution and delivery of this
Agreement by Buyer and the consummation of the transactions contemplated hereby
do not and will not (a) conflict with or result in the breach of, any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Buyer; (b) violate any statute, rule, regulation, order or decree of any
Governmental Entity applicable to Buyer or by which its property or assets may
be bound; or (c) conflict with, result in a breach of, or give rise to a default
under, any of the terms, conditions or provisions of any Lien, lease, agreement
or instrument to which Buyer is a party or by which its property or assets may
be bound, and will not result in a declaration or imposition of any Lien of any
nature whatsoever upon any of the assets of Buyer.
5.4. No Litigation. There is no legal action, suit, claim or controversy
pending or, to Buyer's knowledge, threatened against Buyer in any jurisdiction
that questions the validity of this Agreement or seeks to delay, prohibit or
enjoin or otherwise challenge the transactions contemplated hereby.
5.5. No Finder. Buyer has not paid, or become obligated to pay, any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated hereby.
5.6. Disclosure. None of the information included in this Agreement or in
any written document furnished or to be furnished by Buyer pursuant to this
Agreement is false or misleading or omits to state a fact necessary in order to
make any of the statements made herein or therein not misleading in any material
respect.
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF XXXXX
Xxxxx represents and warrants to Seller, Shareholder and Xxxxx as follows:
6.1. Organization. Xxxxx is a corporation duly organized, validly existing
and in good standing under the laws of the State of New York. Xxxxx has all
requisite corporate power and authority to own, operate and lease its property
and to carry on its business as it is currently conducted.
6.2. Authorization. Xxxxx has all requisite corporate power and authority
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated herein. Xxxxx has taken all corporate action required
to authorize the execution, delivery and performance of this Agreement. Xxxxx
has duly executed and delivered this Agreement and this Agreement constitutes
Xxxxx' legal, valid and binding obligation, enforceable against Xxxxx in
accordance with its terms (subject to applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent transfer or similar laws affecting
creditors' rights generally and to general equitable principles).
109
6.3. Conflicting Agreements; Liens. The execution and delivery of this
Agreement by Xxxxx and the consummation of the transactions contemplated hereby
do not and will not (a) conflict with or result in the breach of, any of the
terms, conditions or provisions of the certificate of incorporation or bylaws of
Xxxxx; (b) violate any statute, rule, regulation, order or decree of any
Governmental Entity applicable to Xxxxx or by which its property or assets may
be bound; or (c) conflict with, result in a breach of, or give rise to a default
under, any of the terms, conditions or provisions of any Lien, lease, agreement
or instrument to which Xxxxx is a party or by which its property or assets may
be bound, and will not result in a declaration or imposition of any Lien of any
nature whatsoever upon any of the assets of Xxxxx.
6.4. No Litigation. There is no legal action, suit, claim or controversy
pending or, to Evan's knowledge, threatened against Xxxxx in any jurisdiction
that questions the validity of this Agreement or seeks to delay, prohibit or
enjoin or otherwise challenge the transactions contemplated hereby.
6.5. No Finder. Xxxxx has not paid, or become obligated to pay, any fee or
commission to any broker, finder or intermediary for or on account of the
transactions contemplated hereby.
6.6. Disclosure. None of the information included in this Agreement or in
any written document furnished or to be furnished by Xxxxx pursuant to this
Agreement is false or misleading or omits to state a fact necessary in order to
make any of the statements made herein or therein not misleading in any material
respect.
ARTICLE 7 FURTHER AGREEMENTS OF THE PARTIES
7.1. Buyer's Investigations. No evaluations, inspections or investigations
with respect to the Business or the Purchased Assets conducted by Buyer or its
agents or representatives prior to Closing shall diminish in any way the effect
of any representation or warranty made by Seller, Shareholder or Xxxxx in this
Agreement or relieve Seller, Shareholder or Xxxxx from any obligation under this
Agreement.
7.2. Seller's Retained Liabilities. Seller agrees, and the Shareholder and
Xxxxx shall cause Seller, to pay and discharge when due, in accordance with its
normal practices as such may be from time to time, but subject to its right to
contest and defend the same in its sole discretion, all of the Excluded
Liabilities.
7.3. Buyer's Assumed Liabilities. Buyer agrees to pay and discharge when
due, in accordance with its normal practices as such may be from time to time,
but subject to its right to contest and defend the same in its sole discretion,
all of the Assumed Liabilities.
7.4. Noncompetition. For a period of three (3) years from and after the
Closing Date (the "Non-Competition Period"), neither Seller nor any Affiliate of
Seller, shall, directly or indirectly, anywhere in the United States, (a) own,
manage, control, conduct or operate any business which would compete with Buyer
in the equipment leasing business; (b) solicit any employee of Buyer for the
purposes of obtaining the services of such person, or otherwise encourage any
such person to discontinue his or her employment with Buyer; or (c) solicit any
customer of Buyer to become a customer of any competing or similar business.
Without limiting the generality of Section 11.7 of this Agreement, if a court of
competent jurisdiction declares by final judgment that any term or provision of
this Section 7.4 is invalid or unenforceable, the parties hereto agree such
court shall have the power to reduce the scope, duration, or geographic areas of
such term or provision, to delete a specific phrase or invalid or unenforceable
term, and to replace such provision, phrase or term with a valid and enforceable
provision, phrase or term that most closely expresses the intent of the parties
as set forth in this Section 7.4. Seller acknowledges that monetary damages
would not be an adequate remedy in the event of a breach of this Section 7.4 and
agree that, in the event of any such breach, Buyer shall be entitled to an
injunction or other appropriate relief.
7.5. Equipment Lease Payments. Seller shall pay over to Buyer any
Equipment Lease Payments received by Seller after the Closing Date. Buyer
acknowledges that Seller has made no representations or warranties as to the
collectability of the Equipment Lease Payments except for the representations
and warranties of Seller in Article 3 of this Agreement, and subject to and in
reliance upon such representations and
110
warranties, Buyer acknowledges that from and after the Closing, Buyer shall be
responsible for collection of Equipment Lease Payments.
7.6. Name Change. On or prior to the Closing Date, Seller shall change its
name to "J Xxxxx Inc.," or another name acceptable to Buyer, and shall cease all
use of the name "M & C Leasing Co., Inc." and all derivatives thereof. Seller
acknowledges that, at all times after the Closing, Buyer shall have sole
ownership of the name "M & C Leasing Co., Inc." and all derivatives thereof, and
neither Seller nor any of its Affiliates shall do anything inconsistent with
such ownership.
7.7. Employment Agreements. At the Closing, Xxxxx and Employee shall each
execute and deliver to Buyer Employment Agreements in the form annexed hereto as
Exhibits C-1 and C-2, as applicable; it being understood that the execution and
delivery of the Employment Agreements is a condition to Buyer's consummation of
the transactions contemplated by this Agreement.
7.8. Personal Goodwill Purchase Agreement. At the Closing, Xxxxx shall
execute and deliver to Buyer the Personal Goodwill Purchase Agreement in the
form annexed hereto as Exhibit D (the "Personal Goodwill Purchase Agreement");
it being understood that the execution and delivery of the Personal Goodwill
Purchase Agreement is a condition to Buyer's consummation of the transactions
contemplated by this Agreement.
7.9. Assignment of Lease; Estoppel Certificates. Buyer and Seller shall
enter into an Assignment of Lease for the Leased Real Property on terms and
conditions reasonably acceptable to Buyer, and Seller shall have received any
and all consents required for such assignment(s). Seller shall have delivered an
Estoppel Certificate from the Lessor with respect to the Leased Real Property.
7.10. Officer's Certificates of Seller and Shareholder. Seller and
Shareholder shall have delivered to Buyer a certificate of a duly authorized
officer of Seller and Shareholder, as applicable, attaching a copy of Seller's
and Shareholder's bylaws and certificate of incorporation and the resolutions of
Seller's and Shareholder's board of directors and Shareholder or Xxxxx
authorizing the transactions contemplated by this Agreement and certifying as to
the incumbency of its officers executing this Agreement and the Ancillary
Agreements to which Seller is a party.
7.11. Officer's Certificate. Buyer shall have delivered to Seller a
certificate of a duly authorized officer of Buyer attaching a copy of Buyer's
bylaws and the resolutions of Buyer's board of directors and sole shareholder
authorizing the transactions contemplated by this Agreement.
7.12. No Publicity. Any public announcement, press release or similar
publicity with respect to the transactions contemplated by this Agreement shall
occur, if at all, at such time and in such manner as the parties mutually agree,
provided, however, that Buyer and Xxxxx shall be entitled to make, without
Seller or Shareholder's agreement, any disclosure and/or filing relating to the
transactions contemplated by this Agreement that is required by applicable law
or The Nasdaq Stock Market after making good faith efforts to consult with
Seller and Shareholder to the greatest extent reasonably practical in light of
the then existing circumstances and legal requirements. Seller, Shareholder and
Xxxxx acknowledge that under applicable federal securities law and the rules of
The Nasdaq Stock Market, Xxxxx is required to announce the execution of this
Agreement, file a report with the SEC within 4 business days of its execution
disclosing the execution of this Agreement and its material terms, and file a
copy of this Agreement with the SEC.
7.13. Turbo License. Seller acknowledge and agrees that to the extent its
existing license to use the Turbo Lease software used in connection with the
Business is not assignable or cannot be immediately assigned to Buyer, Seller
shall immediately purchase for Buyer a version of Turbo Lease software at least
equal to the current version of the Turbo Lease software currently used by
Seller in the operation of the Business for use by Buyer in the operation of the
Business from and after the Closing.
111
ARTICLE 8 INTENTIONALLY OMITTED.
ARTICLE 9 INTENTIONALLY OMITTED.
ARTICLE 10 INTENTIONALLY OMITTED.
ARTICLE 11 INDEMNIFICATION
11.1. Survival. Regardless of any investigation, evaluation or inspection
conducted before or after the Closing, and notwithstanding any knowledge or
notice of any fact or circumstance which either Buyer or Xxxxx, on the one hand,
or Seller, Shareholder or Xxxxx, on the other, may have as the result of such
investigation or otherwise, Buyer and Xxxxx, on the one hand, and Seller,
Shareholder and Xxxxx, on the other, shall each be entitled to rely upon the
representations, warranties, covenants and agreements of the other in this
Agreement and in the Ancillary Agreements. All representations, warranties,
covenants and agreements made by any party in this Agreement or any Ancillary
Agreement, certificate or other writing delivered pursuant hereto or in
connection herewith shall survive the Closing for that period of time set forth
in Section 10.1.1, 10.1.2 and 10.1.3 below, as applicable, and any claims by a
Buyer Indemnitee under Section 10.2 or a Seller Indemnitee under Section 10.3
for indemnification must be made within the period so established, except as to
any matters with respect to which a bona fide written claim shall have been made
or action at law or in equity shall have been commenced before termination of
the applicable period in which event survival shall continue (but only with
respect to, and to the extent of, such claim until such claim shall have been
finally resolved):
11.1.1. representations and warranties set forth in Sections 3.1,
3.2, 3.3, 3.8, 3.10.10, 3.13 and 3.14 of this Agreement shall survive and
remain in full force and effect indefinitely;
11.1.2. representations and warranties relating to Taxes shall
survive and remain in full force and effect until 30 days after the
expiration of the applicable statute of limitations, including all periods
of extension;
11.1.3. all other representations and warranties made by any party
in this Agreement shall survive the Closing for a period of 12 months.
11.2. Indemnification by Seller, Shareholder and Xxxxx. Seller,
Shareholder and Xxxxx shall jointly and severally indemnify, defend and hold
harmless Buyer and its shareholder and their respective Affiliates and the
employees, successors and assigns of any of them (collectively, the "Buyer
Indemnitees") from and against any and all claims, expenses (including
attorneys' fees and other expenses of investigation and defense), losses,
proceedings, audits and liabilities suffered, incurred or paid by any Buyer
Indemnitee resulting from or arising out of (a) any inaccuracy or breach by
Seller, Shareholder or Xxxxx of any representation, warranty, indemnity,
covenant or other agreement (without regard to any materiality qualifier
contained in any representations or warranties referenced in Sections 10.1.1 and
10.1.2 above) of Seller, Shareholder or Xxxxx set forth in this Agreement or any
Ancillary Agreement; (b) any failure to comply with fraudulent conveyance laws
or other laws for the protection of creditors (other than obligations and
liabilities that arise from Buyer's failure to pay or discharge the Assumed
Liabilities); or (c) any Taxes imposed on, assessed against or otherwise payable
by a Buyer Indemnitee with respect to all taxable periods or portions thereof
ending on or prior to the Closing Date, including, without limitation, any Taxes
arising as a result of the transactions contemplated by this Agreement or by
reason of Buyer being a successor in interest or transferee.
11.3. Indemnification by Buyer. Buyer shall indemnify, defend and hold
harmless Seller, Shareholder, Xxxxx and their respective Affiliates and the
employees, successors and assigns of any of them (collectively, the "Seller
Indemnitees") from and against any and all claims, expenses (including
attorneys' fees and other expenses of investigation and defense), losses,
proceedings, audits and liabilities suffered, incurred or paid resulting from or
arising out of (a) any inaccuracy or breach by Buyer of any representation,
warranty, indemnity, covenant or other agreement of Buyer set forth in this
Agreement or the Ancillary Agreements; or (b)
112
the operation by Buyer of the Business after the Closing Date (other than
claims, expenses arising out of the conduct of the Business by Seller on or
prior to the Closing (other than the Assumed Liabilities)).
11.4. Other Indemnification Matters.
11.4.1. Notwithstanding anything in this Article 10 to the contrary,
in the event of any breach of a representation or warranty by a party that
is willful or constitutes a fraud, such party's liability for breach of
such representation or warranty shall survive the Closing and continue in
full force and effect forever thereafter and shall not be subject to the
limitations set forth in Section 10.4.2 below.
11.4.2. Neither Buyer or Xxxxx, on the one hand, nor Seller,
Shareholder or Xxxxx, on the other, will have liability (for
indemnification or otherwise) with respect to matters described in Section
10.1.3 in excess of the sum of the Purchase Price (consisting of the Cash
Purchase Price, the Repaid Indebtedness and the Contingent Purchase Price)
and all consideration paid to Xxxxx under the Personal Goodwill Purchase
Agreement.
11.4.3. Notwithstanding anything in this Article 10 to the contrary,
Seller, Shareholder and Xxxxx, jointly and severally, shall be liable for
any and all claims, expenses (including attorneys' fees and other expenses
of investigation and defense), losses, proceedings, audits and liabilities
associated with, resulting from or arising out of: (a) an inaccuracy or
breach of the representations and warranties set forth in Section 3.15 and
resulting in claims for return of security deposits relating to the
Equipment Leases transferred to Buyer at Closing as Purchased Assets that
exceed $177,862 (exclusive of any interest earned thereon); (b) the
litigations identified by Seller in Schedule 3.17 to this Agreement; and
(c) for avoidance of any doubt, any inaccuracies or breaches by Seller of
the representations and warranties described in Sections 10.1.1 and 10.1.2
(collectively, the "Liability Claims"). Seller, Shareholder and Xxxxx
shall jointly and severally indemnify, defend and hold harmless the Buyer
Indemnitees from and against any and all claims, expenses (including
attorneys' fees and other expenses of investigation and defense), losses,
proceedings, audits and liabilities suffered, incurred or paid by any
Buyer Indemnitee resulting from or arising out of the Liability Claims,
and there shall be no time limit within which to seek recovery for a
Liability Claim (other than as specifically set forth in Section 10.1.2
with respect matters covered thereunder) or any limit on the amount that
may be recovered by a Buyer Indemnitee with respect thereto.
11.5. Allocation of Responsibility. With respect to losses, damages and
expenses arising from matters that existed, were created or arose in part from a
state of facts existing or events occurring on or before the Closing Date and in
part from a state of facts existing or events occurring after the Closing Date,
such losses, damages and expenses shall be allocated between Seller and Buyer on
the basis of the extent to which such state of facts or events related to
periods on or before the Closing Date, on the one hand, and after the Closing
Date, on the other hand. To the extent Buyer Indemnitees, on the one hand, and
Seller Indemnitees, on the other, do not suffer or otherwise incur any expenses,
losses, claims, proceedings, audits, liabilities or damages as a result of an
inaccuracy or breach of a representation or warranty, Buyer Indemnitees, on the
one hand, and Seller Indemnitees, on the other, may not seek indemnification for
such inaccuracy or breach of such representation or warranty.
11.6. Procedures. If any Buyer Indemnitee or Seller Indemnitee becomes
aware of any claim or demand potentially giving rise to a right of
indemnification under Section 10.2 or 10.3 above with respect to any third party
claim, such person shall give written notice to the indemnifying party thereof
within a reasonable time after learning of such claim or demand. The
indemnifying party shall have 30 days from the date of its receipt of such
notice to notify the indemnified party whether the indemnifying party desires,
at its sole cost and expense, to undertake the defense, compromise or settlement
of such claim. The indemnified party shall have the right to participate in such
defense, compromise and settlement through counsel of its choosing and at its
own expense and shall have the right to approve any compromise or settlement
involving any action other than solely the payment of money damages or that
might otherwise have an adverse impact on the business or properties of the
indemnified party. If the indemnifying party does not elect to undertake the
defense, compromise or settlement of such claim, the indemnified party, without
waiving any rights against the
113
indemnifying party, may defend, compromise or settle such claim in its
reasonable discretion and shall be entitled to recover from the indemnifying
party the amount of any judgment or settlement together with any and all other
indemnifiable costs, expenses and liabilities relating thereto. The failure by
any indemnified party to promptly deliver the notice required by this Section
10.6 shall not relieve the indemnifying party of its obligations hereunder
except to the extent such failure materially and adversely prejudices the
indemnifying party's ability to defend, compromise or settle such claim. All
amounts received by any indemnified party under this 10.6 shall be net of any
amounts received by such party under any policy of insurance relating thereto.
11.7. Remedies Cumulative. Except as otherwise expressly provided herein,
the remedies provided for under this 10.7 are cumulative and shall be in
addition to, and not in lieu of, all other remedies available to the parties
hereto, whether under this Agreement or at law or in equity; provided that any
remedies seeking monetary damages outside of this Article 10 with respect to
liabilities and/or claims with respect to matters described in Section 10.1.3
shall be brought within the time period applicable to claims or actions to be
made with respect representations and warranties under Section 10.1.3 and shall
be limited as described in Section 10.4.2 hereof.
11.8. Survival of Covenants and Agreements. All covenants and agreements
to be performed after the Closing shall continue indefinitely.
ARTICLE 12 MISCELLANEOUS
12.1. Books and Records. Seller shall deliver to Buyer promptly after the
Closing all of the Business Information and Records. Buyer shall preserve such
records for the lesser of (a) four (4) years after the Closing Date or (b) such
period as Buyer would ordinarily preserve such records pursuant to its records
retention policy as currently in effect. During such period, Buyer shall make
the same available for examination (or for the making of xxxxx or extracts) by
Seller upon request, if necessary for a lawful purpose, at reasonable times so
as not to interfere with Buyer's business. In the event that, prior to the
expiration of such period, Buyer decides to destroy any such records pursuant to
its records retention policy then in effect, Buyer shall give Seller at least
thirty (30) days notice of such decision during which xxxx Xxxxxx may request
that Buyer transfer to Seller all such records to be destroyed and, if such a
request is received, Buyer shall comply therewith at Seller's sole cost and
expense; if no such request is received by Buyer, Buyer may destroy the records
with respect to which notice has been given to Seller.
12.2. Notices. All notices, consents, waivers, notifications, and other
communications required or permitted by this Agreement shall be in writing and
shall be deemed given when (a) delivered to the appropriate address by hand or
by nationally recognized overnight courier service (costs prepaid); (b) sent by
facsimile with confirmation of transmission by the transmitting equipment and
confirmed by hard copy mailed by regular mail the same day; or (c) if sent by
certified mail, return receipt requested; in each case to the following
addresses, facsimile numbers and marked to the attention of the person (by name
or title) designated below (or to such other address, facsimile number, or
person as an party may designate by notice to the other parties):
If to Buyer: Xxxxx National Leasing, Inc.
Xxx Xxxxxxx Xxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn.: Xxxxxxx X. Xxxxx, Chief Executive Officer
Fax: (000)000-0000
With a copy to: Xxxxxx Beach LLP
Xxxxxx at Exchange
Exchange Street, Suite 1000
Buffalo, New York 14210
Attn.: Xxxxxxx Xxxxxxxx
Fax: (000)000-0000
114
If to Xxxxx: Xxxxx Bancorp. Inc.
00-00 Xxxxx Xxxx Xxxxxx
Xxxxxx, Xxx Xxxx 00000
Attn.: Xxxxx Xxxxxx, President and CEO
Fax: (000)000-0000
With a Copy to: Xxxxxx Beach LLP
Xxxxxx at Exchange
Exchange Street, Suite 1000
Buffalo, New York 14210
Attn.: Xxxxxxx Xxxxxxxx
Fax: (000)000-0000
If to Seller: M & C Leasing Co., Inc.
0000 Xxxxx Xxxx, Xxxxx 0
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn.: Xxxx Xxxxx
Fax: (000) 000-0000
With a copy to: Amigone, Sanchez, Mattrey & Xxxxxxxx, LLP
0000 Xxxx Xxxxx Tower
000 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn. Xxxxxxx X. Xxxxxxx, Esq.
Fax (000) 000-0000
If to the Shareholder: Apcot NY Corp.
0000 Xxxxx Xxxx, Xxxxx 0
Xxxx Xxxxxx, Xxx Xxxx 00000
Attn.: Xxxx Xxxxx
Fax: (000) 000-0000
With a copy to: Amigone, Sanchez, Mattrey & Xxxxxxxx, LLP
0000 Xxxx Xxxxx Tower
000 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn. Xxxxxxx X. Xxxxxxx, Esq.
Fax (000) 000-0000
If to Xxxxx: Xxxx Xxxxx
0 Xxxxxxx Xxxx
Xxxxxxx Xxxx, Xxx Xxxx 00000
With a copy to: Amigone, Sanchez, Mattrey & Xxxxxxxx, LLP
0000 Xxxx Xxxxx Tower
000 Xxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attn. Xxxxxxx X. Xxxxxxx, Esq.
Fax (000) 000-0000
12.3. Assignment; Binding Effect; Benefits. Buyer may assign its rights
and obligations under this Agreement to any Affiliate of Buyer, including any
successor to or purchaser of all or substantially all of the
115
stock or assets of Buyer. Except as set forth in this Section 11.3, neither this
Agreement nor any rights or obligations arising hereunder shall be assignable by
any party hereto without the prior written consent of the other parties. Subject
to the foregoing, this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
12.4. Waiver. No delay or failure by any party to exercise any right,
remedy or power hereunder shall impair or be construed as a waiver thereof. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any contemporaneous or subsequent
breach of that provision or of any other provision.
12.5. Entire Agreement; Amendments. This Agreement sets forth the entire
agreement and understanding between Buyer and Xxxxx, on the one hand, and
Seller, Shareholder and Xxxxx, on the other, and supersedes all prior agreements
relating to the subject matter hereof. This Agreement may be amended, modified
or supplemented only by a written instrument signed by the parties hereto.
12.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to its
conflicts of laws provisions.
12.7. Severability. In the event any provision of this Agreement is found
to be void or unenforceable by a court of competent jurisdiction, the remaining
provisions hereof shall continue to be binding upon the parties with the same
effect as though such void or unenforceable provision had been deleted.
12.8. No Third-Party Beneficiaries. Each of the parties hereto intends
that this Agreement shall not benefit or create any right or cause of action in
or on behalf of any person other than the parties hereto and their respective
permitted successors and assigns under Section 11.3 above.
12.9. Headings. The headings and subheadings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning or interpretation of any provision of this Agreement.
12.10. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which when taken
together shall constitute one instrument.
12.11. Pronouns. As used in this Agreement, the masculine, feminine or
neuter gender shall be deemed to include the others whenever the context so
indicates or requires.
12.12. Ambiguities. The parties acknowledge that the parties and their
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 exhibit or amendments hereto.
12.13. Construction. Whenever the term "include" or "including" is used in
this Agreement, it shall mean "including, without limitation" (whether or not
such language is specifically set forth) and shall not be deemed to limit the
range of possibilities to those items specifically enumerated. The words
"hereof", "herein" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision. Terms defined in the
singular have a comparable meaning when used in the plural and vice versa.
116
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the date
first above set forth.
XXXXX NATIONAL LEASING, INC.
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Title: Chief Executive Officer
XXXXX BANCORP, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------
Title: President/CEO
M & C LEASING CO., INC.
By: /s/ Xxxx Xxxxx
-------------------------------
Title: President
APCOT NY CORP.
By: /s/ Xxxx Xxxxx
-------------------------------
Title: President
/s/ Xxxx Xxxxx
-------------------------------
Xxxx Xxxxx, Individually
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx, Individually
117
EXHIBIT A
118
EXHIBIT B
ALLOCATION OF PURCHASE PRICE
119
