STOCK PURCHASE AGREEMENT AND PLAN OF MERGER
THIS STOCK PURCHASE AGREEMENT AND PLAN OF MERGER (the "Agreement") is
made as of the 27th day of July, 1998, by and among BARBERA BUSINESS SYSTEMS,
INC., a Maryland corporation ("BBS"), XXXXXX X. XXXXXXX ("JSB"), XXXXXXXX X.
XXXXXXX ("KPB"), XXXXXX X. XXXXXXX ("JPB") and XXXXXXXX X. XXXXXXXXXX ("PAB" and
together with JSB, KPB and JPB, collectively, the "BBS Stockholders"), the
holders of all of the issued and outstanding capital stock of BBS, IMTEK OFFICE
SOLUTIONS, INC., a Delaware corporation ("Office Solutions"), and IMTEK
ACQUISITION CORPORATION, a Maryland corporation ("Acquisition").
RECITALS
A. On the date hereof, JSB and KPB own 60% of the issued and
outstanding capital stock of BBS (the "JSB and KPB Stock"), JPB and PAB own 40%
of the issued and outstanding capital stock of BBS (the "JPB and PAB Stock"),
and the BBS Stockholders collectively hold all of the issued and outstanding
shares of capital stock of BBS (collectively, the "BBS Stock");
B. Acquisition is a wholly-owned subsidiary of Office Solutions;
C. Acquisition desires to purchase all of the BBS Stock held by JSB and
KPB (the "Stock Transaction");
D. As part of the same overall transaction, BBS desires to merge with
and into Acquisition (the "Merger Transaction"; the Stock Transaction and the
Merger Transaction, collectively, the "BBS Transactions") at Merger Closing (as
defined in ARTICLE 8 hereof); and
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E. The parties have agreed to enter into this Agreement to set forth
the terms and conditions of the BBS Transactions.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and
representations contained herein, the parties agree as follows:
ARTICLE 1
BBS TRANSACTIONS
1.1 Stock Transaction.
(a) Subject to all of the terms of this Agreement, on the date of
this Agreement, Acquisition shall purchase and acquire from JSB and KPB, and JSB
and KPB shall sell, transfer and convey to Acquisition all of the JSB and KPB
Stock.
(b) On the date of this Agreement, and in consideration for the
JSB and KPB Stock, Acquisition shall deliver (i) to JSB and KPB, jointly, the
sum of One Million Four Hundred Ninety-Eight Thousand Dollars ($1,498,000.00),
less the Tax Audit Escrow Funds to be held in escrow in accordance with the
terms of Section 5.9 hereof, and (ii) to First National Bank of Maryland, N.A.
the principal amount, together with accrued and unpaid interest, of $
(collectively, the "Purchase Price"). JSB and KPB agree to deliver to
Acquisition, on the date hereof in exchange for such consideration, stock
certificates endorsed in blank or accompanied by duly executed stock powers,
evidencing the JSB and KPB Stock.
1.2 Merger Transaction.
(a) Subject to all of the terms and conditions of this Agreement
and pursuant to the terms and conditions set forth in those certain Articles of
Merger attached hereto and incorporated herein by reference as Exhibit 1.2(a)
(the "Articles of Merger"), on the Merger
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Closing Date, as defined in ARTICLE 8 hereof, BBS shall merge with and into
Acquisition by filing the Articles of Merger with the State Department of
Assessments and Taxation of Maryland (the "SDAT").
(b) Within five (5) days of the date of this Agreement,
Acquisition shall deliver to Acquisition's counsel, McGuire, Woods, Battle &
Xxxxxx LLP, 200,000 shares of Office Solutions common stock, par value $0.000001
per share (the "Merger Shares") in the names of JPB and PAB in such amounts as
set forth in the Articles of Merger. The Merger Shares shall be held in escrow
by said counsel pursuant to the Merger Escrow Agreement attached hereto and
incorporated herein by reference as Exhibit 1.2(b) until the Merger Closing
Date. Acquisition agrees that promptly upon the filing and acceptance for record
of the Articles of Merger by SDAT, it will cause its counsel to deliver to JPB
and PAB stock certificates evidencing the Merger Shares in such amounts as set
forth in the Articles of Merger. In exchange therefor, PAB and JPB agree to
deliver at the Merger Closing, against delivery of the Merger Shares, stock
certificates evidencing the JPB and PAB Stock, for cancellation as provided in
the Articles of Merger.
(c) The parties hereto intend that the Merger Transaction qualify
as a tax-free reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D)
of the Internal Revenue Code of 1986 (the "Code"). The parties hereto agree to
take no action inconsistent with the treatment of the Merger Transaction as a
reorganization under Code Sections 368(a)(1)(A) and 368(a)(2)(D) and further
agree to comply with all applicable Internal Revenue Service filing and other
requirements with respect to such Merger Transaction. Nevertheless, no private
letter
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ruling or opinion of counsel is being sought in this regard and such tax
treatment is not a condition of Merger Closing hereunder.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
2.1 Certain Representations and Warranties to BBS and BBS Stockholders.
Acquisition hereby represents and warrants to BBS, JSB and KPB as of the date
hereof, and to JPB and PAB as of the Merger Closing Date, that:
(a) Organization. Acquisition is a corporation duly incorporated,
validly existing, and in good standing under the laws of Maryland with all
necessary corporate power to own its properties and to carry on its business as
now owned and operated by it.
(b) Authority. Acquisition has full power, legal capacity and
authority to execute, deliver and perform this Agreement and this Agreement will
be the legal, valid and binding obligation of Acquisition, enforceable in
accordance with its terms and conditions, except as may be limited by bankruptcy
and insolvency laws and by other laws affecting the rights of creditors
generally.
(c) Contravention; Consents and Approvals. Other than the filing
of the Articles of Merger with the SDAT, no filing, action, consent or approval
of any person, entity, or governmental body is required by Acquisition for the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein. The execution and delivery of this Agreement
by Acquisition and the consummation contemplated herein by Acquisition will not
result in the breach of the terms or conditions of, or constitute a default
under, or violate any agreement or instrument to which Acquisition is a party or
any judgment, order, writ, injunction or decree of any court, administrative
agency or governmental body.
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(d) Investigation of Financial Condition. Acquisition and its
accountants have met with the officers and the accountants of BBS to discuss the
financial condition, business and operations of BBS. BBS has made available to
Acquisition and its representatives all books and records of the BBS.
(e) No Representations. Except as specifically set forth in this
Agreement, no oral or written promises or representations with respect to BBS
have been made to Acquisition by any person connected with BBS.
2.2 Full Disclosure as of the Date Hereof. Acquisition hereby
represents and warrants to BBS, JSB and KPB as of the date hereof, that none of
the representations and warranties made by Acquisition herein, or in any
exhibit, certificate, schedule or memorandum furnished or to be furnished to
BBS, JSB or KPB hereunder, contains or will contain any untrue statement of
material fact or omit any material fact the omission of which would be
misleading.
2.3 Certain Representations and Warranties to JPB and PAB. Acquisition
hereby represents and warrants to JPB and PAB, as of the Merger Closing Date,
that:
(a) Acquisition currently has no plan or intention of selling or
disposing of any of its assets after the Merger Transaction, except for sales
and dispositions made in the ordinary course of business; and
(b) Following the Merger Transaction, Acquisition will, within
the meaning of Treas. Reg. Section 1.368-1(d), continue the historic business of
BBS or use a significant portion of the historic business assets of BBS in its
business operations.
2.4 Full Disclosure to BBS, JPB and PAB as of the Merger Closing Date.
Acquisition hereby represents and warrants to BBS, JPB and PAB, as of the Merger
Closing
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Date, that none of the representations and warranties made by Acquisition
herein, or in any exhibit, certificate, schedule or memorandum furnished or to
be furnished to JPB or PAB hereunder, contains or will contain any untrue
statement of material fact or omit any material fact the omission of which would
be misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF OFFICE SOLUTIONS
3.1 Certain Representations and Warranties to BBS and the BBS
Stockholders. Office Solutions hereby represents and warrants (i) to BBS, JSB
and KPB as of the date hereof, and (ii) to JPB and PAB as of the Merger Closing
Date, that:
(a) Organization. Office Solutions is a corporation duly
incorporated, validly existing, and in good standing under the laws of Delaware
with all necessary corporate power to own its properties and to carry on its
business as now owned and operated by it.
(b) Authority. Office Solutions has full power, legal capacity
and authority to execute, deliver and perform this Agreement for itself and in
its capacity as the sole stockholder of Acquisition and this Agreement will be
the legal, valid and binding obligation of Office Solutions, enforceable in
accordance with its terms and conditions, except as may be limited by bankruptcy
and insolvency laws and by other laws affecting the rights of creditors
generally.
(c) Contravention; Consents and Approvals. Except for (i)
applicable filings pursuant to federal and state securities laws, rules and
regulations (the "Securities Laws"), which shall be made as required, and (ii)
the filing of the Articles of Merger with the SDAT, no filing, action, consent
or approval of any person, entity, or governmental body (other than as required
by Section 3.16 of the Loan Agreement (hereinafter defined), which consent or
approval has been
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obtained on or prior to the date hereof, subject to the satisfaction of certain
obligations by Office Solutions, Acquisition and/or BBS after the date hereof),
is required by Office Solutions for the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein. In connection with
the aforementioned consent or approval pursuant to the Loan Agreement, Office
Solutions, Acquisition and BBS hereby agree to make all reasonable efforts to
satisfy such conditions as soon as practicable after the date hereof. The
execution and delivery of this Agreement by Office Solutions and the
consummation contemplated herein by Office Solutions will not result in the
breach of the terms or conditions of, or constitute a default under, or violate
any agreement or instrument to which Office Solutions is a party or any
judgment, order, writ, injunction or decree of any court, administrative agency
or governmental body.
(d) Investigation of Financial Condition Office Solutions and its
accountants have met with the officers and the accountants of BBS to discuss the
financial condition, business and operations of BBS. BBS has made available to
Office Solutions and its representatives all books and records of the BBS.
(e) No Representations. Except as specifically set forth in this
Agreement, no oral or written promises or representations with respect to BBS
have been made to Office Solutions or Acquisition by any officer, director,
employee or agent of BBS.
3.2 Certain Representations and Warranties to JPB and PAB. Office
Solutions hereby represents and warrants to JPB and PAB, that:
(a) Disclosure Documents. At or prior to the Merger Closing Date,
Office Solutions shall have delivered to JPB and PAB copies of the following
documents (hereinafter collectively referred to as the "Disclosure Documents"):
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(i) for the quarter and year ending June 30, 1998,
historical filings made by Office Solutions on Forms 10-K, 10-Q and 8-K, and all
amendments thereto;
(ii) that certain Private Placement Memorandum dated January
10, 1998 pursuant to which Office Solutions offered for sale 75,000 shares of
its preferred stock, par value $0.01 per share, previously designated as Series
A Convertible Preferred Stock (the "Designated Preferred Stock");
(iii) that certain Loan Agreement dated May 28, 1998 by and
among Office Solutions, Imtek Corporation, a Maryland corporation, Imtek
Services Corporation, a Maryland corporation, and Imtek Funding Corporation, a
Maryland corporation, and Sirrom Capital Corporation, a Tennessee corporation
(the "Loan Agreement");
(iv) that certain Disclosure Memorandum to be prepared by
Office Solutions and delivered in connection with a proposed rescission offer
with respect to Office Solutions stock (the "Disclosure Memorandum"); and
(v) any and all current reports on Form 8-K required to be
filed by Office Solutions or its affiliates from September 30, 1997 through the
Merger Closing Date.
(b) Full Disclosure as of the Merger Closing Date. As of the
Merger Closing Date, none of the representations and warranties made by Office
Solutions herein, or in any exhibit, certificate, schedule or memorandum
furnished or to be furnished to JPB or PAB hereunder, contains or will contain
any untrue statement of material fact or omits any material fact the omission of
which would be misleading. As of the Merger Closing Date, the information
contained in the Disclosure Documents, taken as a whole, does not contain any
untrue statement
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of a material fact or omit to state a material fact necessary to make the
statements therein not misleading.
(c) Office Solutions Stock. The Merger Shares will, upon
filing of the Articles of Merger, be duly authorized, validly issued, fully paid
and non-assessable and shall be free and clear of all liens, charges,
restrictions (except for such restrictions as may be applicable pursuant to the
Securities Laws) and encumbrances. When delivered as provided in the preceding
sentence, the Merger Shares shall constitute on a fully diluted basis 2.44% of
the common stock of Office Solutions.
(d) Tax Representations. As of the date hereof and as of the
Merger Closing Date:
(i) Office Solutions will hold at least 80% of the stock of
Acquisition prior to the Merger Transaction and Office Solutions currently has
no plan or intention of disposing of any stock in Acquisition or of causing
Acquisition to issue additional shares of stock after the Merger Transaction;
(ii) Office Solutions currently has no plan or intention of
reacquiring any of the stock it issues in the Merger Transaction; and
(iii) Office Solutions currently has no plan or intention of
liquidating Acquisition or causing Acquisition to sell or dispose of any of its
assets, except for sales and dispositions made in the ordinary course of
business.
(e) Capitalization. As of the date hereof, the authorized capital
stock of Office Solutions consists of 250,000,000 shares of common stock, par
value $0.000001 per share, and 5,000,000 shares of preferred stock, par value
$0.01 per share, of which 75,000 shares have been
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designated as Series A Convertible Preferred Stock (the "Designated Preferred
Stock"). 7,538,361 shares of Office Solutions' common stock, par value $0.000001
per share (the "Common Shares"), are either issued and outstanding or authorized
for issuance, but unissued; (ii) 6,740 shares of the Designated Preferred Stock
have been subscribed for (the "Subscribed Preferred Stock") in an offering by
Office Solutions of 75,000 shares of Designated Preferred Stock; (iii) without
regard to the authorized for issuance but, as of yet, unissued Common Shares and
the Subscribed Preferred Stock, except for the Common Shares and the warrants
provided to the Lender under that certain Warrant and Registration Rights
Agreement dated May 29, 1998 between Office Solutions and Sirrom Capital
Corporation (the "Lender Warrants"), there are no shares of capital stock or
other securities of Office Solutions issued or outstanding; (iv) except for the
Common Shares that have been authorized for issuance, but not issued, the
Subscribed Preferred Stock, conversion rights associated with the Subscribed
Preferred Stock, the Lender Warrants, a possible claim by one Xxxxxx X. Xxxxxxx
relating to 49,750 shares of Office Solutions' common stock and Office
Solutions' agreement with Xxxxxx Xxxxx Xxxxx ("FBW"), set forth in a letter from
FBW to Office Solutions dated March 27, 1998 (a copy of which has been provided
to the BBS Stockholders by Office Solutions), to issue FBW warrants to purchase
250,000 shares of the common stock of Office Solutions, there are no outstanding
options, warrants or rights to purchase or acquire from Office Solutions any
securities of Office Solutions, and, except as set forth in this Section 3.2, no
contracts, commitments, agreements, or restrictions as to which Office Solutions
is a party or by which it is bound relating to any shares of capital stock or
other securities of Office Solutions (including the Common Shares), whether or
not outstanding. Please note that certain factual disclosures have been made to
the BBS Stockholders
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relating to possible rescission rights accruing to the holders of certain
capital stock of Office Solutions, which, if exercised, would cause the number
of shares of Common Shares and Subscribed Preferred Stock set forth herein to be
reduced.
3.3 Full Disclosure to BBS, JSB and KPB. Office Solutions hereby
represents and warrants to BBS, JSB and KPB, as of the date hereof and to JSB
and KPB as of the Merger Closing Date, that none of the representations and
warranties made by Office Solutions herein, or in any exhibit, certificate,
schedule or memorandum furnished or to be furnished to JSB or KPB hereunder,
contains or will contain any untrue statement of material fact or omits any
material fact the omission of which would be misleading.
ARTICLE 4A
REPRESENTATIONS AND WARRANTIES OF
BBS AND THE BBS STOCKHOLDERS
BBS, JSB and KPB jointly and severally represent and warrant to
Acquisition and Office Solutions, as of the date hereof, and JPB and PAB jointly
and severally represent and warrant to Acquisition and Office Solutions, as of
the date hereof and as of the Merger Closing Date, that:
4A.1 BBS Stock. The BBS Stock is duly authorized, validly issued, fully
paid and nonassessable. Each BBS Stockholder is the record owner of the number
of shares of BBS Stock as indicated on Exhibit 4A.1 attached hereto and
incorporated herein by reference and each such BBS Stockholder has good and
marketable title to the shares of BBS Stock held by her or him, free of any
liens, claims, encumbrances or pledges of any kind and are not subject to any
agreement, instrument or understanding relating to the transfer, disposition or
voting of such stock. The BBS Stock represents all of the issued and outstanding
shares of capital stock of BBS
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and there are no outstanding rights of any kind to acquire additional shares of
any class of stock from BBS.
4A.2 Investigation of Financial Condition. BBS and the BBS Stockholders
and/or its/their accountants have met with, respectively, the officers and the
accountants of Acquisition and Office Solutions, to discuss the financial
condition, business and operations of Acquisition and Office Solutions,
respectively. Acquisition and Office Solutions, respectively, have made
available to BBS and each of the BBS Stockholders and/or its/their
representatives all books and records of the Acquisition and Office Solutions.
4A.3 Non-Registered Securities. Each of PAB and JPB understands and
acknowledges that the Merger Shares will be sold on the Merger Closing Date,
subject to the terms and conditions of this Agreement, in reliance upon an
exemption provided under the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") for non-public
offerings and have not been registered under the Securities Act or any state
securities laws. Each BBS Stockholder makes the following representations and
warranties in connection therewith:
(a) Investment Intent. The Merger Shares shall be held subsequent
to the Merger Closing Date for investment purposes only, and not with a view to,
or for sale in connection with, any distribution thereof and with no present
intention of distributing or reselling any part of such stock.
(b) Disposition of Imtek Stock. Unless sold pursuant to an
effective registration statement, each of PAB and JPB agrees not to dispose of
any Merger Shares until counsel for such BBS Stockholder, who is reasonably
acceptable to Office Solutions shall have
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delivered a written opinion to Office Solutions that the intended disposition is
permissible pursuant to an exemption from the Securities Act or any applicable
state securities act, or the rules and regulations thereunder.
(c) Acknowledgments. Each of PAB and JPB understands and
acknowledges that her or his investment in Merger Shares is a speculative
investment that is not liquid, and each of PAB and JPB acknowledges that she or
he has adequate means of providing for current needs and personal contingencies
and has no need for liquidity with respect to the Merger Shares.
(d) Legend. Each of the stock certificates evidencing any BBS
Stockholder's ownership of the Merger Shares shall bear a legend stating that
the Merger Shares have not been registered under the Securities Act or any state
securities acts and may not be transferred unless registered under the
Securities Act or pursuant to an exemption from federal and state securities
laws and regulations.
(e) No Representations. Except as specifically set forth in this
Agreement, no oral or written promises or representations with respect to Office
Solutions or the Merger Shares have been made to any BBS Stockholder by any
person connected with Office Solutions or Acquisition.
(f) No Market. Each of PAB and JPB has no reason to anticipate
any change in her or his personal circumstances, financial or otherwise, that
would require or cause her or him to seek to sell the Merger Shares. Each of PAB
and JPB understands that no market exists for the Merger Shares and that there
can be no assurances that any market will exist in the future for the Merger
Shares, and therefore it may not be possible to liquidate the Merger Shares in
the event of an emergency.
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(g) Availability of Information. Each of PAB and JPB has been
given an opportunity to ask questions concerning Office Solutions and its
operations, to receive answers thereto, and to obtain any additional information
to the extent that such information is readily available or can be made
available without unreasonable effort or expense.
(h) Accredited Investor; Purchaser Representative. As of the date
hereof, each of JSB and KPB is an accredited investor (within the meaning of
Rule 501 of Regulation D promulgated under the Act) and JSB hereby agrees to
serve as a Purchaser Representative (as defined in Rule 501(h) of Regulation D)
for and on behalf of PAB and JPB in connection with their receipt of Merger
Shares. Each of PAB and JPB, either alone or with their Purchaser
Representative, has such knowledge and experience in financial and business
matters that each is capable of evaluating the merits and risks of their
investment in Office Solutions.
4A.4 Contravention; Consents and Approvals Except for the filing of the
Articles of Merger with the SDAT and except as set forth on Exhibit 4A.4,
attached hereto and incorporated herein by reference, no filing, action, consent
or approval of any person, entity, or governmental body is required by BBS or
the BBS Stockholders for the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein. Except with respect to the
agreements and instruments listed on Exhibit 4A.4, the execution and delivery of
this Agreement by Office Solutions and the consummation contemplated herein by
Office Solutions will not result in a breach of the terms or conditions of, or
constitute a default under, or violate any agreement or instrument to which BBS
or the BBS Stockholders is a party or any judgment, order, writ, injunction or
decree of any court, administrative agency or governmental body.
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4A.5 Full Disclosure. None of the representations and warranties made
in this Agreement by BBS or by any BBS Stockholder, or in any exhibit,
certificate or memorandum furnished or to be furnished by BBS or by any BBS
Stockholder, or on its, her, his or their behalf, contains or will contain any
untrue statement of material fact, or omit any material fact the omission of
which would be misleading as of the date or dates such representation was made.
ARTICLE 4B
REPRESENTATIONS AND WARRANTIES OF
BBS AND THE BBS STOCKHOLDERS
BBS and the BBS Stockholders jointly and severally represent and
warrant to Acquisition and Office Solutions, as of the date hereof (except where
expressly made as of the Merger Closing Date), that:
4B.1 Organization. BBS is a corporation duly incorporated, validly
existing, and in good standing under the laws of Maryland with all necessary
corporate power to own its properties and to carry on its business as now owned
and operated by it.
4B.2 Authority. BBS and each of the BBS Stockholders has full power,
legal capacity and authority to execute, deliver and perform this Agreement and
this Agreement will be the legal, valid and binding obligation of BBS and each
of the BBS Stockholders, enforceable in accordance with its terms and
conditions, except as may be limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally. As of the Merger Closing
Date, each of JPB and PAB has full power, legal capacity and authority to
execute, deliver and perform this Agreement and this Agreement will be the
legal, valid and binding obligation of each of JPB and PAB, enforceable in
accordance with its terms and conditions, except as may be limited by bankruptcy
and insolvency laws and by other laws affecting the rights of creditors
generally.
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4B.3 Financial Information. Exhibit 4B.3A, attached hereto and
incorporated herein by reference, includes true and correct financial statements
of BBS prepared by BBS and reviewed by Xxxxx Xxxxxxxx, LLP consisting of a
balance sheet for BBS for the period ending June 30, 1997 (the "1997 Balance
Sheet") and a statement of income, cash flow and retained earnings of BBS for
the period ending June 30, 1997 (the "1997 Income Statement"). Exhibit 4B.3B
attached hereto and incorporated herein by reference, includes true and correct
financial statements of BBS prepared by BBS consisting of a preliminary balance
sheet for the period ending June 30, 1998 (the "1998 Balance Sheet") and a
preliminary statement of income, and retained earnings for BBS for the period
ending June 30, 1998 (the "1998 Income Statement"). The 1997 Balance Sheet, the
1998 Balance Sheet, the 1997 Income Statement and the 1998 Income Statement have
been prepared, in all material respects, in accordance with United States
generally accepted accounting principles, consistently applied (hereinafter
"GAAP").
4B.4 Liabilities and Accounts Receivable.
(a) BBS does not have any liabilities, fixed or contingent, which
would have a material adverse effect on or material adverse change in (i) the
business, assets, financial condition or prospects of BBS, (ii) the relationship
of BBS with any material customer or supplier its business, (iii) any material
contract or agreement to which BBS is a party, or (iv) the transactions
contemplated by this Agreement and the Articles of Merger (the foregoing being
hereinafter collectively referred to as a "Material Adverse Effect"), other
than:
(i) liabilities fully reflected on the 1998 Balance Sheet in
accordance with GAAP and as set forth on the lien search report attached hereto
as Exhibit 4B.4(a)(i) and incorporated herein by reference;
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(ii) liabilities arising since the date of the 1998 Balance
Sheet in the normal course of BBS's business consistent with past custom and
practice and those which are disclosed on Exhibit 4B.4(a)(ii), attached hereto
and incorporated herein by reference; and
(iii) liabilities disclosed on Exhibit 4A.4, attached hereto
and incorporated herein by reference, resulting from accelerated maturity upon
change in control due to the fact that Acquisition, not BBS, shall be the
surviving corporation in the Merger Transaction contemplated by this Agreement
and the Articles of Merger.
(b) All of BBS's accounts receivable are listed on Exhibit
4B.4(b), attached hereto and incorporated herein by reference, and, to the best
of the knowledge of the BBS Stockholders, are valid accounts receivable, and
will be fully collectible in the ordinary course of BBS's business, less a
reasonable amount for bad accounts receivable reserve, which amount shall not
exceed $8,200.00. Exhibit 4B.4(b) accurately and completely reflects the
accounts receivable of BBS. All accounts receivable of BBS have been generated
in the ordinary course of BBS's business consistent with BBS's past practices.
To the best of the knowledge of the BBS Stockholders, there are no defenses or
set-offs to any of the accounts receivable listed on Exhibit 4B.4(b). On the
date hereof, the accounts receivable of BBS outstanding for 90 days or less
exceed the accounts payable and other accrued liabilities of BBS.
4B.5 Other Assets. Exhibit 4B.5, attached hereto and incorporated
herein by reference, sets forth all of the material assets of BBS as of the date
hereof, other than the accounts receivable listed on Exhibit 4B.4(b).
4B.6 Tax Returns. BBS has filed all federal and other tax returns for
all periods on or before the due date of such returns (as such date may have
been extended by any valid extension
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request) and has paid all taxes due for the periods covered by such returns. As
of the date hereof, BBS shall have established sufficient reserves for the
payment of all federal, state and local taxes due and payable by BBS with
respect to all periods prior to the date hereof. The reserves for taxes referred
to in the preceding sentence are adequate to cover all federal, state and local
taxes, and interest and penalties, if any, that may be assessed with respect to
the business operations of BBS for the period(s) ending on the date hereof and
for all prior periods. No federal, state, local or other tax returns or reports
filed by BBS on or prior to the date hereof will result in any taxes,
assessments, fees or other governmental charges in excess of the tax reserves
referred to in this Section. BBS has duly withheld and collected all taxes which
BBS is required to withhold or collect by law, has paid over to the proper
authorities all such amounts required to be paid, and has in reserve all amounts
so withheld or collected which have not yet been required to be paid. No taxing
authority has asserted any deficiency for any prior tax period of BBS, and
neither BBS nor any BBS Stockholder is aware of any facts which would constitute
the basis for the assertion of any such deficiency; provided, however, that BBS
is presently undergoing an audit by the Internal Revenue Service for the fiscal
year ending on June 30, 1995 (the "1995 Audit").
4B.7 Policies of Insurance. All insurance policies, performance bonds
and letters of credit insuring BBS or which BBS has had issued and which have
not expired are listed on Exhibit 4B.7, attached hereto and incorporated herein
by reference. Exhibit 4B.7, includes the names and addresses of all such
insurers and sureties, policy and bond numbers, types of coverage or bond, time
periods or projects covered, and the names and addresses of all known agents or
agencies with respect to each listed insurance policy, performance bond and
letter of credit. BBS's current insurance policies, performance bonds and
letters of credit are in force and the
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premiums thereon are not delinquent. BBS has not received notification from any
insurance carrier denying or disputing any claim made by BBS or denying or
disputing any coverage for any such claim or denying or disputing the amount of
any claim. BBS does not have any claim against any of its insurance carriers
under any policies insuring it pending or anticipated and there has been no
occurrence of any kind which would give rise to any such claim.
4B.8 Employees, Pensions and ERISA.
(a) Except as set forth on Exhibit 4B.8(a), attached hereto and
incorporated herein by reference, BBS does not have any contract of employment
with any officer or other employee.
(b) No employee of BBS is represented by any union. The name,
address and social security number and current rate of compensation of each of
BBS's employees and the capacity in which each such person is employed by BBS is
as set forth on Exhibit 4B.8(b), attached hereto and incorporated herein by
reference. There is no pending or, to the best of the knowledge of the BBS
Stockholders, threatened dispute between the Company and any of its employees
which might have a Material Adverse Effect on BBS.
(c) Except as listed on Exhibit 4B.8(c), attached hereto and
incorporated herein by reference, BBS does not have, and has not had, any
employee benefit plans, funds or programs (within the meaning of the Code or the
Employment Retirement Income Security Act of 1974) which are currently
maintained and/or were established or sponsored by BBS (whether or not now
terminated) or to which BBS currently contributes or has an obligation to
contribute in the future, including, without limitation, employment agreements
and any other agreements containing "golden parachute" provisions. As to each
plan, fund or program listed on Exhibit
19
4B.8(c) (collectively, "Plans"), to the best of the knowledge of the BBS
Stockholders, BBS has complied, in all material respects, with all applicable
laws and regulations in administering such Plans, including specifically the
provisions of ERISA and the qualification provisions of Section 401 of the
Internal Revenue Code.
4B.9 Compliance with Laws. Except as set forth on Exhibit 4B.9 attached
hereto and incorporated herein by reference, to the best knowledge of the BBS
Stockholders, BBS has complied with, and is not in violation of, applicable
federal, state or local statutes, laws and regulations (including, without
limitation, any applicable building, zoning or other law, ordinance or
regulation) affecting its properties or the operation of its business, except
for matters which would not have a Material Adverse Effect on BBS.
4B.10 Intellectual Property. To the best of the knowledge of the BBS
Stockholders, BBS has not infringed and is not now infringing on any trade name,
trademark, service xxxx or copyright (collectively, "Intellectual Property")
belonging to any person, firm or corporation and, to the best of the knowledge
of the BBS Stockholders, no other person, firm or corporation has infringed, or
is presently infringing, on any Intellectual Property right of BBS. The
Intellectual Property in which BBS has rights is listed on Exhibit 4B.10,
attached hereto and incorporated herein by reference.
4B.11 Existing Agreements. Exhibit 4A.4 attached hereto and
incorporated herein by reference, sets forth all agreements and contracts of BBS
requiring consent with respect to transfer of BBS's interest thereunder. Except
as set forth on Exhibit 4A.4, no written agreement, instrument or unwritten
understanding by, between or among BBS and any third party or parties
20
shall be violated, breached, impaired or in any way limited by the transactions
contemplated by this Agreement.
4B.12 Customers. The number of customers BBS serves, together with
information as to the services rendered to such customers, frequency of service
and the contractual rights of each customer are listed on Exhibit 4B.12 attached
hereto and incorporated herein by reference. Neither BBS, nor to the best of the
knowledge of the BBS Stockholders, any person or party to the contracts listed
on Exhibit 4B.12 is in material default under any such contracts, nor has any
event occurred which with notice or the passage of time would constitute such a
default.
4B.13 Tangible Personal Property and Inventory. To the best of BBS' and
the BBS Stockholders' knowledge, BBS is in possession of and has good and
marketable title to, or has valid leasehold interests in or valid rights under
contract to use, all tangible personal property used in the conduct of its
business. All tangible personal property of BBS is adequate and suitable for the
conduct by BBS of the business presently being conducted by BBS and is in good
working order and condition, ordinary wear and tear excepted. All inventory of
BBS reflected on the 1998 Balance Sheet consisted, and all inventory acquired
since the date of the 1998 Balance Sheet consists, of a quality and quantity
usable and salable in the ordinary course of business consistent with past
practice and industry standards (i) except to the extent of the reserve with
respect thereto set forth on the 1998 Balance Sheet, and (ii) subject to
end-of-year adjustments which shall not have a material adverse effect on the
business or assets of BBS.
4B.14 Absence of Changes. Except as listed on Exhibit 4B.14, attached
hereto and incorporated herein by reference, since the date of the 1998 Balance
Sheet, BBS has been operated in the ordinary course of business consistent with
past practice and there has not been
21
any material adverse change, or any event or development which, individually or
together with other such events or developments, could reasonably be expected to
result in a material adverse change in or effect on the business or financial
condition of BBS or its assets.
4B.15 Tax Representation. BBS has not disposed of an amount of its
assets that would prevent Acquisition from acquiring "substantially all of the
properties" of BBS within the meaning of Section 368(a)(2)(D) of the Internal
Revenue Code.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 Payment of Expenses. Each BBS Stockholder shall pay all expenses
incurred by her or him or BBS in connection with the negotiation, execution and
performance of this Agreement. Acquisition and Office Solutions each shall pay
all expenses incurred by it in connection with the negotiation, execution and
performance of this Agreement.
5.2 Authorizing the Merger Transaction. Subject to the terms and
conditions of this Agreement, the parties covenant and agree to undertake all
actions (whether as officers, directors, stockholders or otherwise) necessary to
authorize, approve and effect the consummation of the Merger Transaction,
including without limitation, the execution, delivery and filing of the Articles
of Merger, in accordance with the terms of this Agreement.
5.3 Conduct of BBS's Business. From the date hereof until the Merger
Closing Date, BBS will (a) conduct its business in the ordinary and usual
course, and in a manner consistent with past practices; (b) maintain the assets
used in its business in good repair, reasonable wear and tear excepted, and (c)
use reasonable efforts to maintain its present business operations. BBS will
notify PAB and JPB of any emergency or material change in the normal conduct of
the business or operations of BBS.
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5.4 Forbearance by BBS. Except as otherwise contemplated by this
Agreement, BBS will not from the date hereof until the Merger Closing Date,
without the written consent of PAB and JPB merge, dissolve, liquidate, sell or
dispose of any of its capital stock, or otherwise effect any change in control
(other than as contemplated by the Articles of Merger), or sell a substantial
portion of its assets except in the ordinary and usual course of business or
enter into any discussions, negotiations or agreements to do the same.
5.5 BBS Employee Benefit Plans. The 401(k)/profit sharing plan (the
"401(k) Plan") presently maintained by BBS will be terminated effective the day
prior to the date hereof. To the extent, if any, that distribution of elective
contributions under the 401(k) Plan is not permissible under by Code Section
401(k)(10) and Treasury Regulations promulgated thereunder, the 401(k) Plan will
be maintained by Acquisition as a "frozen" plan under which participants will
continue to have the authority to direct investments of their account balances
in accordance with Section 404(c) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). BBS employees who continue as employees of
Acquisition and/or Office Solutions shall be entitled to participate in any
employee benefit plans, programs or arrangements maintained by Office Solutions
on the same basis as Office Solutions employees, with past service credit
granted for service with BBS for purposes of eligibility and vesting, unless a
comparable BBS plan, program or arrangement is continued by Acquisition.
5.6 Employment Agreements. At the Merger Closing, Acquisition shall
enter into a separate written employment agreement with each of PAB, JPB and
Xxxxx X. Xxxxxxxxxx on such terms and conditions as are mutually satisfactory to
the parties to such agreements; provided, however, that the term of each such
agreement shall be one year.
23
5.7 Certain Liabilities of the BBS Stockholders. Exhibit 5.7, attached
hereto and incorporated herein by reference, sets forth certain liabilities of
BBS and the BBS Stockholders that shall be retained and satisfied by the BBS
Stockholders as they come due, but in any event at or prior to the Merger
Closing Date.
5.8 Release of Certain Guaranty Obligations. Acquisition shall
cooperate with BBS and the BBS Stockholders to obtain the release of JSB and KPB
from their personal guaranties listed on Exhibit 5.8, attached hereto and
incorporated herein by reference. Office Solutions and Acquisitions agree to
make all reasonable efforts to use proceeds received from the collection of the
accounts receivable to satisfy, in the ordinary course of business, the
obligations listed on Exhibit 5.8, attached hereto and incorporated herein by
reference.
5.9 Tax Audit Escrow. Upon the date hereof, the sum of Ten Thousand
Dollars ($10,000) (the "Tax Audit Escrow Funds") shall be deducted from the
monetary consideration paid in connection with the Stock Transaction and placed
in an escrow account that shall be administered pursuant to the terms and
conditions of the Tax Audit Escrow Agreement attached hereto as Exhibit 5.9 and
incorporated herein by reference. The Tax Audit Escrow Funds shall be paid to
Acquisition to the extent necessary to offset any liabilities arising out of the
1995 Audit or any other federal or state tax audit of BBS for any period ending
prior to the date hereof. Upon conclusion of the 1995 Audit and any and all
proceedings or audits arising out of or in connection with the 1995 Audit and,
at the election of JSB and KPB, the lapse of any applicable statutory appeal
period, any Tax Audit Escrow Funds, and the interest thereon, not paid to
Acquisition pursuant to the preceding sentence shall be paid over to JSB and
KPB. JSB and KPB shall retain the right to contest and defend the Tax Audit and
any related appeals and actions. Office
24
Solutions, Acquisition and BBS agree to apply any available net operating losses
("NOLs") of BBS that carry over to Acquisition in the Merger Transaction under
Section 381 of the Code (and any comparable provision of state tax law) to
offset any tax liability that may result from the Tax Audit, prior to applying
any of the Tax Audit Escrow Funds to such liability.
5.10 Performance of Merger Obligations. Except as otherwise
specifically provided in this Agreement, (i) Acquisition agrees to pay and
perform all debts, liabilities, obligations and duties of BBS assumed by
Acquisition as a matter of law in connection with the Merger Transaction
including, without limitation, those obligations guaranteed by JSB and KPB under
their personal guarantees listed on Exhibit 5.8 (the "Liabilities"), and (ii)
Office Solutions agrees to pay and perform all Liabilities except for
Liabilities which have not been disclosed to Acquisition or Office Solutions in
writing on or prior to the date hereof (the "Undisclosed Liabilities"),
provided, however, that Acquisition's and Office Solutions' obligations under
Article 9 of this Agreement to indemnify, defend and hold the BBS Stockholders
harmless shall not apply with respect to any Undisclosed Liabilities.
5.11 Tax Indemnification.
(a) Subject to the limitations set forth in Sections 5.11(b) and (c)
below, each of the BBS Stockholders jointly and severally agrees to indemnify,
defend and hold harmless each of Acquisition and Office Solutions, and their
respective officers, directors and employees, on an after-tax basis, against and
in respect of any tax liability (including interest and penalties) incurred by
BBS or Acquisition, as successor to BBS, as a result of the Merger Transaction
being treated as a reorganization under any provision of Section 368(a) of the
Code (other than Sections 368(a)(1)(A) and (a)(2)(D) of the Code). Such payment
shall be made on an after-tax basis after
25
taking into account (i) any NOLs that carry over to Acquisition in the Merger
Transaction under Section 381 of the Code that reduce the tax liability
described in section 5.11(a), and (ii) any taxes imposed on Office Solutions or
Acquisition as a result of the receipt of the indemnification payment described
in Section 5.11(a).
(b) Neither Office Solutions nor Acquisition shall be entitled to
indemnification under section 5.11(a) above unless the aggregate amount that
would be payable thereunder exceeds $30,000.00. In the event that, as a result
of the recharacterization of the Merger Transaction, Office Solutions or
Acquisition receives an indemnification payment, and later receives a reduction
in tax liability resulting from an increase in tax basis in its assets that
would not have been realized had the Merger Transaction not been recharacterized
as a reorganization other than a reorganization described in Sections
368(a)(1)(A) and (a)(2)(D) of the Code, Office Solutions or Acquisition, as the
case may be, shall promptly pay the amount of such tax reduction to the BBS
Stockholders. The indemnification set forth Section 5.11(a) shall not cover any
claims, losses, costs, expenses, damages, penalties or other liabilities that
may accrue to BBS or Acquisition, as successor to BBS, as a result of any
actions taken by BBS or Acquisition after the date hereof (other than
consummation of the Merger).
(c) Once the aggregate amount of tax liability described in Section
5.11(a) above exceeds $30,000.00, the party entitled to indemnification
hereunder shall be entitled to obtain indemnification from the first dollar of
such liability that exceeds $30,000.00, provided however, that the maximum
liability to the BBS Stockholders for indemnification pursuant to this Section
5.11 when aggregated with any indemnification liability of the BBS Stockholders
resulting from ARTICLE 9 hereof shall not exceed a total of $500,000.
26
(d) JPB and PAB agree to hold Acquisition and Office Solutions harmless
from any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, and reasonable attorney fees, that either JPB or PAB shall incur or
suffer, which arise out of, result from or relate to taxes imposed upon either
of them in the event that the Merger Transaction fails to qualify as a tax-free
reorganization. JPB and PAB acknowledge that they have sought and relied upon
the advice of their respective tax advisors and attorneys with respect to the
tax treatment of the Merger Acquisition and the other transactions contemplated
hereby, and that neither Acquisition nor Office Solutions makes any
representation or warranty with respect to the tax treatment of the Merger
Transaction or the other transactions contemplated hereby.
5.12 Board of Directors. On or prior to the date hereof, (i) JSB and
KPB shall resign as directors of BBS, and (ii) the BBS Stockholders shall cause
the charter of BBS to be amended and restated to be as set forth on Exhibit
5.12A, attached hereto and incorporated herein by reference, and cause the
By-laws of BBS to be amended and restated to be as set forth in Exhibit 5.12B,
all in accordance with Maryland law. Until the Merger Closing Date, Office
Solutions and Acquisition agree to cause the shares of BBS Stock acquired in the
Stock Transaction to be voted in favor of electing JPB and PAB as directors of
BBS, provided, however, that on the Merger Closing Date, JPB and PAB shall
resign as directors of BBS.
5.13 Life Insurance. Office Solutions, Acquisition and BBS agree that
the life insurance policies owned by BBS with respect to the lives of the BBS
Stockholders may be assigned to the BBS Stockholders upon receipt from any BBS
Stockholder of the cash surrender value at any time prior to the Merger Closing
Date.
27
5.14 Non-Compete and Confidentiality Agreements. On or prior to the
date hereof and for the consideration set forth therein, which shall be in
addition to the Purchase Price, JSB and KPB shall enter into the Non-Compete and
Confidentiality Agreements attached hereto as Exhibit 5.14.
ARTICLE 6
CONDITIONS PRECEDENT TO PERFORMANCE BY
PAB AND JPB OF MERGER TRANSACTION
The obligations of PAB and JPB hereunder with respect to consummating
the Merger Transaction shall be subject to the satisfaction, at or before the
Merger Closing, of the following conditions:
6.1 Disclosure. PAB and JPB shall have received the Disclosure
Documents and Office Solutions and Acquisition shall have provided PAB and JPB
with adequate time to review the Disclosure Documents and an opportunity to meet
with and ask questions of the management of Office Solutions and Acquisition.
Neither PAB nor JPB shall be obligated to close the Merger Transaction unless
(i) the Disclosure Documents are delivered to PAB and JPB in accordance with the
terms of this Agreement and (ii) upon receipt and review of the Disclosure
Documents, PAB and JPB determine that the Merger Transaction is advisable;
provided, however, that PAB and JPB may waive this condition in whole or in part
with written notice at any time on or after November 1, 1998; provided, further,
that in the event that Acquisition or Office Solutions pays PAB and JPB $2,500
each prior to November 1, 1998, PAB and JPB may not waive this condition in
whole or in part at any time prior to December 1, 1998.
6.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties made by Acquisition and Office
Solutions at Merger Closing or
28
as of the Merger Closing Date in this Agreement or in any written statement that
shall be delivered to PAB or JPB under this Agreement shall be true and accurate
on and as of the Merger Closing Date as though made at that time. This
conditions may be waived in whole or in part by PAB and JPB without prior
notice; provided, however, that no such waiver of this condition shall
constitute a waiver of any other condition, right or remedy, at law or in
equity.
ARTICLE 7
CONDITIONS PRECEDENT TO PERFORMANCE BY
ACQUISITION AND OFFICE SOLUTIONS OF MERGER TRANSACTION
7.1 Disclosure. PAB and JPB shall have received the Disclosure
Documents and Office Solutions and Acquisition shall have provided PAB and JPB
with adequate time to review the Disclosure Documents and an opportunity to meet
with and ask questions of the management of Office Solutions and Acquisition
related thereto. Neither Office Solutions nor Acquisition shall be obligated to
close the Merger Transaction unless (i) the Disclosure Documents are delivered
to PAB and JPB in accordance with the terms of this Agreement and (ii) upon
receipt and review of the Disclosure Documents, PAB and JPB determine that the
Merger Transaction is advisable; provided, however, that this condition shall
terminate and expire and be deemed waived on November 1, 1998 unless Acquisition
or Office Solutions pays PAB and JPB $2,500 each prior to November 1, 1998, in
which case this condition shall terminate and expire and be deemed waived on
December 1, 1998.
7.2 Accuracy of Representations. Except as otherwise permitted by this
Agreement, all representations and warranties by PAB and JPB at the Merger
Closing or as of the Merger Closing Date in this Agreement or in any written
statement that shall be delivered to Acquisition or Office Solutions under this
Agreement shall be true and accurate on and as of the Merger
29
Closing Date as though made at that time. This condition may be waived in whole
or in part by Acquisitions or Office Solutions without prior notice; provided,
however, that no such waiver of this condition shall constitute a waiver of any
other condition, right or remedy, at law or in equity.
ARTICLE 8
MERGER CLOSING
8.1 Merger Closing. The closing of the transactions referred to in the
Articles of Merger (the "Merger Closing") shall be held at the offices of BBS,
or such other place as shall be mutually agreed upon, as soon as practicable
upon the satisfaction or waiver of the conditions set forth in this Agreement.
The date on which the Merger Closing occurs shall be the "Merger Closing Date".
At the Merger Closing:
(a) Acquisition and BBS shall execute, deliver and file the
Articles of Merger.
b) Counsel to Acquisition shall deliver to PAB and JPB the Merger
Shares.
(c) PAB and JPB shall deliver to Acquisition all of the shares of
BBS Stock held by them.
(d) The other transactions described in the Articles of Merger
and otherwise necessary to effect the Merger Transaction shall take place.
8.2 Termination. If the Merger Closing has not occurred by December 15,
1998, unless such date has been extended by mutual written agreement of PAB, JPB
and Acquisition, the Merger Transaction shall automatically be terminated and
counsel to Acquisition shall return the Merger Shares to Acquisition in
accordance with the Escrow Agreement.
30
ARTICLE 9
INDEMNIFICATION
9.1 BBS Stockholders. Subject to Section 9.4, each of the BBS
Stockholders jointly and severally agrees to indemnify, defend and hold each of
Acquisition and Office Solutions, and their respective officers, directors and
employees harmless against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties, and reasonable attorney fees, that
either of them shall incur or suffer, which arise out of, result from or relate
to (a) any breach of, or failure by BBS or the BBS Stockholders to perform any
of the covenants or agreements in this Agreement, or (b) any material inaccuracy
or misrepresentation in the representations and warranties set forth in ARTICLE
4A and/or 4B of this Agreement.
9.2 By Acquisition. Subject to Section 9.4, Acquisition agrees to
indemnify, defend and hold each of the BBS Stockholders harmless against and in
respect of any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, and reasonable attorney fees, that either of them shall incur or
suffer, which arise out of, result from or relate to (a) any breach of, or
failure by Acquisition to perform any of the covenants or agreements in this
Agreement, or (b) any material inaccuracy or misrepresentation in the
representations and warranties set forth in ARTICLE 2 or ARTICLE 3 of this
Agreement.
9.3 By Office Solutions. Subject to Section 9.4, Office Solutions
agrees to indemnify, defend and hold each of the BBS Stockholders harmless
against and in respect of any and all claims, demands, losses, costs, expenses,
obligations, liabilities, damages, recoveries and
31
deficiencies, including interest, penalties, and reasonable attorney fees, that
either of them shall incur or suffer, which arise out of, result from or relate
to (a) any breach of, or failure by Office Solutions or Acquisition to perform
any of the covenants or agreements in this Agreement, or (b) any material
inaccuracy or misrepresentation in the representations and warranties set forth
in ARTICLE 2 or ARTICLE 3 of this Agreement.
9.4 Threshold and Limit. Except with respect to the indemnification
obligations under Section 5.11, no party seeking indemnification under this
Article 9 shall be entitled to indemnification hereunder until the aggregate
amount of their loss or damage shall exceed $100,000.00; provided, however, that
once the aggregate amount of their loss or damage shall exceed $100,000.00, the
party entitled to indemnification hereunder shall be entitled to obtain
indemnification from the first dollar of such loss or damage that exceeds
$100,000.00 up to a maximum limit of $600,000.00 less any amount paid pursuant
to Section 5.11. The $100,000.00 threshold set forth above shall not apply to
losses incurred by JSB and KPB with respect to their personal guarantees listed
on Exhibit 5.8, which right of indemnification shall commence as of the first
dollar of loss.
9.5 Survival. The indemnification provided for in Section 5.11 and this
Section 9 shall survive for a period of one year following the Merger Closing
Date.
9.6 BBS Stockholders' Option for Satisfying Indemnification Obligation.
BBS Stockholders' owning shares of Office Solutions stock may, at their option,
satisfy their indemnification obligations hereunder and under Section 5.11 by
way of cash payment(s) or by tendering to the indemnified party Office Solutions
common stock (or the stock of any successor if such stock is received in
exchange or upon conversion of Office Solution common stock) with
32
an aggregate fair market value equal to such party's indemnification obligation,
provided such shares may be tendered to Acquisition or Office Solutions in
accordance with all applicable federal and state securities laws, rules and
regulations. For the purposes of this section, fair market value per share of
Office Solutions common stock (or the common stock of any successor to Office
Solutions) shall be either (i) if listed or included in a public stock exchange
or market, the average closing sale or bid price over a period of five days
prior to the date liability under this section is determined; or (ii) if not
listed in a public stock exchange or market, the fair market value as determined
by a qualified independent third party evaluator who shall be mutually
acceptable to Office Solutions and the BBS Stockholders.
9.7 Exclusive Remedy. Except with respect to the indemnity contemplated
by Sections 5.11 and 10.6 hereof, the indemnification set forth in this Article
9 shall be the sole and exclusive remedy for each party to this Agreement with
respect to any and all claims, demands, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties, and reasonable attorney fees, which arise out of, result from or
relate to (a) any breach of, or failure of any other party to perform any of the
covenants or agreements in this Agreement, or (b) any material inaccuracy or
misrepresentation in the representations and warranties of any party set forth
in this Agreement.
ARTICLE 10
REGISTRATION RIGHTS AND DISCLOSURE
10.1 Piggy-Back Registration Rights.
(a) In the event that Office Solutions proposes to file a
registration statement with the SEC on Form X-0, X-0 or S-3 (the "Registration
Statement") with respect to an
33
underwritten public offering by Office Solutions of its common stock (the
"Common Stock") for cash, whether or not for Office Solutions' own account,
during the period commencing on the date hereof and ending on the third
anniversary of the Merger Closing Date, Office Solutions shall give written
notice of such proposed filing to the BBS Stockholders at least fifteen (15)
days before the anticipated filing date (in which notice Office Solutions shall
use its best efforts to name the proposed managing underwriters of such offering
and the anticipated price range per share of such Common Stock), and such notice
shall offer each of PAB and JPB the opportunity to register such number of
Merger Shares as each may request in writing within ten (10) days after receipt
of such notice; provided, however, that if the managing underwriter of such
registration advises Office Solutions in writing (a copy of which is provided to
each of PAB and JPB) that, in its opinion, the number of shares of securities
requested to be included in the registration exceeds the number which can be
sold in such offering within a price range acceptable to Office Solutions
without adversely affecting the marketability of the offering, then Office
Solutions will include in such registration only the number of shares of
securities recommended by the managing underwriter, selected in the following
order of priority: (i) in the case of a primary registration on behalf of Office
Solutions, (A) first, the securities that Office Solutions intends to be
included in such registration, and (B) second, the securities requested to be
included therein by Xxxxxx X. Xxxxxx and any permitted transferee or assignee
thereof ("Xxxxxx") (pro rata according to the securities proposed to be included
in the registration by such holders), and (C) third, the Merger Shares that PAB
and JPB have requested to be included in such registration, together with
securities held by other holders requesting to be included in such registration
(pro rata according to the securities proposed to be included in the
34
registration by PAB and JPB and such other holders), or (ii) in the case of a
secondary registration for the account of any holder (including PAB or JPB) of
Office Solutions' securities, (A) first, the securities requested to be included
therein by the holder or holders initially requesting such registration and by
Sirrom Capital Corporation (pro rata according to the securities proposed to be
included in the registration by such initiating holder or holders), (B) second,
the Merger Shares requested to be included therein by PAB and JPB and the
securities requested to be included therein by all other holders (pro rata
according to the securities proposed to be included in the registration by PAB,
JPB and such other holders).
(b) Nothing contained herein shall require Office Solutions to
(i) reduce the amount of shares of Common Stock or other securities to be
offered by Office Solutions in such offering for any reason or (ii) include any
shares of Common Stock of any BBS Stockholder in any public offering for which a
Registration Statement is or is proposed to be filed if such shares of Common
Stock are, at the time of effectiveness of such Registration Statement, eligible
to be sold under Rule 144 ("Rule 144") under the Securities Act of 1933, as
amended, or are eligible to be sold within a three month period under Rule 144.
At the time such shares become freely salable under Rule 144, all piggy-back
rights under this Article 10 shall terminate.
(c) Nothing in this Article 10 shall create any liability on the
part of Office Solutions to any BBS Stockholder if the Company for any reason
should decide not to file a Registration Statement or decide not to request that
the Registration Statement so filed be declared effective or otherwise elect not
to consummate the public offering contemplated thereby. The Registration Rights
are subject to the condition that BBS Stockholders desiring to
35
include shares of Common Stock in the public offering agree to timely execute
and deliver the underwriting agreement to be executed and delivered by Office
Solutions and the other sellers, if any, in connection with such public
offering.
(d) PAB and JPB shall have the right, at any time during the
period set forth in subsection 10.1(a), to exercise their Registration Rights an
aggregate of two times.
(e) Each of PAB and JPB exercising his or her Registration Rights
shall bear and pay all costs and expenses of counsel retained by PAB or JPB in
connection with or related to the exercise of such Registration Rights and shall
bear and pay all underwriting discounts and commissions relating to the Merger
Shares sold by PAB or JPB pursuant to the exercise by PAB or JPB of her or his
Registration Rights.
(f) The Registration Rights granted pursuant to this Article 10
shall not apply to a registration (i) relating solely to an employee stock
option, purchase or other similar plan, (ii) related solely to a dividend
reinvestment plan, or (iii) on Form S-4 or Form S-8 or any successor form
thereto.
10.2 Requirements and Limitations. Neither PAB nor JPB may participate
in any underwritten registration hereunder unless such she or he (i) agrees to
sell her or his Merger Shares on the basis provided in any underwriting
arrangements approved by the persons entitled to approve such arrangements;
including, without limitation, the underwriter and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements and this Agreement. Notwithstanding the previous sentence, neither
PAB nor JPB shall be required to make any representations or warranties to, or
make any agreements with Office Solutions or any
36
underwriter other than representations, warranties or agreements regarding PAB
or JPB, as the case may be, or her or his intended method of distribution and
other matters reasonably requested by Office Solutions or the underwriter. In
the event any Merger Shares are proposed to be included in an underwritten
public offering, the holder of such Merger Shares shall (together with Office
Solutions and the other holders of securities proposing to distribute their
securities through such underwriting, if any), enter into an underwriting
agreement in customary form with the managing underwriter selected for such
underwriting by Office Solutions.
10.3 No Demand Registration. Nothing in this Article 10 shall be deemed
to give any right to initiate a registration of Merger Shares or other
securities of Office Solutions or demand a registration of Merger Shares or
other securities other than in connection with a registration initiated by
Office Solutions.
10.4 Withdrawal. If either PAB or JPB disapproves of the terms of any
underwriting, she or he may elect to withdraw therefrom by written notice to
Office Solutions and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration, and
shall not be transferred until such time as there has been filed a registration
statement with the Securities and Exchange Commission registering such
securities which has become effective or until such holder receives a written
opinion from counsel to the satisfaction of Office Solutions that an exemption
from the registration provisions of federal and state securities laws is
available with respect to the proposed transfer of such securities.
10.5 Right to Terminate Registration. Office Solutions shall have the
right to terminate or withdraw any registration initiated by it prior to the
effectiveness of such registration, whether or not PAB or JPB has elected to
include securities in such registration.
37
10.6 Registration Rights Indemnification.
(a) Office Solutions will indemnify and hold JPB, PAB and their
agents (including sales agents and Underwriters) and each person, if any, who
controls (within the meaning of the Securities Act or the Exchange Act) any of
the foregoing, harmless to the maximum extent permitted by law, from and against
any loss, claim, liability, damage or expense (including attorneys' fees)
resulting from a claim that any registration statement, prospectus or amendment
thereof or supplement thereto, which includes Merger Shares to be sold by such
BBS Stockholder, contains a material misstatement or omission, unless such claim
(i) is based upon any untrue statement or alleged untrue statement or omission
or alleged omission made in said registration statement, prospectus, amendment
or supplement in reliance upon and in conformity with written information
furnished by PAB or JPB for use in preparation thereof, or (ii) results from the
failure of either PAB or JPB to deliver a current prospectus or otherwise comply
with any other applicable prospectus delivery requirements under the Securities
Act; and JPB and PAB will indemnify and hold harmless Office Solutions, its
directors, officers and agents (including sales agents and Underwriters) and
each person, if any, who controls (within the meaning of the Securities Act or
the Exchange Act) any of the foregoing against any loss, claim, liability,
damage or expense (including attorneys' fees) resulting from (i) any untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished by PAB or JPB for use
in preparation thereof, or (ii) the failure of either PAB or JPB to deliver a
current prospectus or otherwise comply with any other applicable prospectus
delivery requirements to which they are subject under the Securities Act.
38
(b) Promptly after receipt by an indemnified party under this
Section 10.6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 10.6, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
under this Section 10.6 or otherwise to the extent such omission did not
materially prejudice the indemnifying party. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent that it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there exists a
conflict of interest between the indemnifying party and any indemnified party or
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to, and inconsistent or in
conflict with, those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assert such legal
defense and to otherwise participate in the defense of such action on behalf of
such legal defenses and to otherwise participate in the defense of such action
on behalf of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 10.6 for any
39
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless (i) the indemnified party shall have
employed separate counsel in accordance with the proviso to the preceding
sentence, (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party; and except that, if clause (i)
or (iii) is applicable, such liability shall be only in respect of the counsel
referred to in such clause (i) or (iii). No settlement of any action against any
party under this Section 10.6 shall bind the other party unless such other party
agrees in writing to the terms of such settlement (which agreement will not be
unreasonably withheld).
(c) The obligation of the indemnifying party to indemnify the
indemnified party under this Section 10.6 shall, in each case, be in addition to
any liability which the indemnifying party may otherwise have hereunder or
otherwise at law or in equity.
(d) If the indemnification provided for in this Section 10.6 from
the indemnifying party is applicable in accordance with the terms of this
Agreement but for any reason is held to be unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative faults of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities or
40
expenses, as well as any other relevant equitable considerations. The relative
faults of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to above shall be
deemed to include, subject to the limitations set forth in Section (a) and (b)
hereof, any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this subsection 10.6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person.
10.7 Information by BBS Stockholders; Office Solutions. BBS
Stockholders proposing to have their Common Stock included in any registration
shall furnish to Office Solutions information regarding such BBS Stockholders
and the distribution proposed by them as Office Solutions may request in writing
and as shall be required in connection with any registration, qualification or
compliance in connection therewith. After the Merger Closing Date, Office
Solutions covenants that during such times thereafter as it is subject to the
reporting requirements
41
of the Exchange Act, it will file any reports required to be filed by it under
the federal securities laws.
ARTICLE 11
MISCELLANEOUS
11.1 Headings. The headings throughout this Agreement are for
convenience and reference only, and shall in no way be deemed to define, limit,
or add to the meaning of any provision of this Agreement.
11.2 Modification. This Agreement and any provision hereof, may not be
waived, changed, modified, or discharged orally, but it can be changed by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, or discharge is sought.
11.3 Non-Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressed in writing and signed by the party
against whom such waiver is charged; and (i) the failure of any party to insist
in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future of
any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision hereof
shall not be deemed a waiver of such breach or failure, and (iii) no waiver by
any party of one breach by another party shall be construed as a waiver with
respect to any other subsequent breach.
42
11.4 Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
11.5 Entire Agreement. Other than the Articles of Merger, the Merger
Escrow Agreement, the Tax Audit Escrow Agreement and the employment agreements
referenced herein, this Agreement contains the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings, whether oral or written, with respect to the matters contained
herein (which matters shall not be deemed to include the non-competition and
confidentiality obligations entered into by JSB and KPB pursuant to those
certain Non-Compete and Confidentiality Agreements executed on the date hereof
by JSB and KPB, which shall be considered outside this Agreement and shall not
be superceded by this Agreement).
11.6 Choice of Law. This Agreement and its application shall be
governed by the internal laws of the State of Maryland, without regard to its
choice of law provisions.
11.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.8 Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the third day after mailing if mailed to the party to whom
notice is to be given, by first class mail, registered or certified, postage
prepaid, and properly addressed as follows:
If to Acquisition: 0000 Xxx Xxxxx Xxxxxx
00
Xxxxx 000
Xxxxxxxxx, XX 00000
If to Office Solutions: 0000 Xxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
If to BBS: c/o Xxxxxx X. Xxxxxxx
00000 Xxxxxx Xxx Xxxxx
Xxxx Xxxxxx, XX 00000
With a copy to : 0000 Xxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxx, XX 00000
If to BBS Stockholders: c/o Xxxxxx X. Xxxxxxx
00000 Xxxxxx Xxx Xxxxx
Xxxx Xxxxxx, XX 00000
11.9 Binding Effect. This Agreement shall not be assignable by any
party without the prior written consent of each other party to this Agreement.
This Agreement shall inure to and be binding upon the heirs, executors, personal
representatives, permitted successors and permitted assigns of each of the
parties to this Agreement.
11.10 Mutual Cooperation. The parties hereto shall cooperate with each
other to achieve the purpose of this Agreement, and shall execute such other and
further documents and take such other and further actions as may be necessary or
convenient to effect the transaction described herein.
11.11 Announcements. The parties hereto will consult and cooperate with
each other as to the timing and content of any announcements of the transactions
contemplated hereby to the general public or the employees, customers or
suppliers of BBS.
44
11.12 Survival of Representations and Warranties. The representation,
warranties, covenants and agreements of the parties set forth in this Agreement
or in any instrument, certificate, opinion, or other writing providing for in
it, shall survive the Merger Closing for a period of one year irrespective of
any investigation made by or on behalf of any party.
11.13 Exhibits. As of the execution hereof, the parties hereto have
provided each other with the Exhibits provided herein above, including any items
referenced therein or required to be attached thereto. Any material changes to
the Exhibits shall be immediately disclosed to the other party.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
45
AGREED TO AND ACCEPTED as of the date first above-written. This
Agreement may be executed in two or more counterparts, which together shall
constitute but one instrument.
WITNESS:
Name: Xxxxxx X. Xxxxxxx
[SEAL]
------------------------------ -------------------------------
Name: Xxxxxxxx X. Xxxxxxx
[SEAL]
------------------------------ -------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxx
[SEAL]
------------------------------ -------------------------------
Name: Xxxxxx X. Xxxxxxx
[SEAL]
------------------------------ -------------------------------
ATTEST: BARBERA BUSINESS SYSTEMS, INC.
By: [SEAL]
------------------------------ -------------------------------
Name: Name:
Title:
46
ATTEST: IMTEK ACQUISITION
CORPORATION
By: [SEAL]
------------------------------ -------------------------------
Name: Name:
Title:
ATTEST: IMTEK OFFICE SOLUTIONS, INC.
By: [SEAL]
------------------------------ -------------------------------
Name: Name:
Title:
47
ATTACHED EXHIBITS
1.2(a) Articles of Merger
1.2(b) Merger Escrow Agreement
4A.1 BBS Stock
4A.4 Required Consents
4B.3A BBS 1997 Financial Information
4B.3B BBS 1998 Financial Information
4B.4(a)(i) Lien Report on BBS
4B.4(a)(ii) BBS Off-Balance Sheet Liabilities
4B.4(b) BBS Accounts Receivable
4B.5 Other BBS Assets
4B.7 BBS Insurance Policies, Performance Bonds and Letters of Credit
4B.8(a) BBS Employees With Employment Contracts
4B.8(b) BBS Employees
4B.8(c) Benefit Plans
4B.9 BBS Compliance Schedule
4B.10 BBS Intellectual Property
4B.12 BBS Customers
4B.14 Changes
5.7 Liabilities Assumed By BBS Stockholders
5.8 Personal Guaranties by JSB and KPB
5.9 Tax Audit Escrow Agreement
5.12A Amended and Restated Charter of BBS
5.12B Amended and Restated Bylaws of BBS
5.14 Non-Compete and Confidentiality Agreements by JSB & KPB
