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EXHIBIT 2.15
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 23,
1998, by and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"),
OFFICE CENTRE SACRAMENTO, a Delaware corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), SIERRA OFFICE SYSTEMS AND PRODUCTS, INC., a
California corporation ("Company"), XXXXXXX XXXX, an individual resident in
California, XXXX X. XXXX, XX. and ROSE XXXXX XXXX (each a "Seller" collectively
the "Sellers").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish
to set forth the terms and conditions upon which a merger of the Company with
and into Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition
and the Company deems the merger advisable and in the best interests of each of
Buyer, Acquisition and the Company and of their respective shareholders.
WHEREAS, the Sellers own 94.7% of the outstanding shares of
common stock of the Company.
WHEREAS, the shareholders of Acquisition and the Company have
approved this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms
have the meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which
the Company has or may acquire any rights, (b) under which the Company has or
may become subject to any obligation or liability, or (c) by which the Company
or any of the assets owned, leased or used by it is or may become bound.
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"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty,
covenant, obligation, or other provision of this Agreement or any instrument
delivered pursuant to this Agreement will be deemed to have occurred if there is
or has been any material inaccuracy in or material breach of, or any failure
substantially to perform or comply with, such representation, warranty,
covenant, obligation, or other provision, and the term "Breach" means any such
material inaccuracy, breach, failure, claim, occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this
Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the
Closing actually takes place.
"COMPANY"--as defined in the Recitals of this
Agreement.
"CONSENT"--any approval, consent, ratification,
waiver, or other authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions
contemplated by this Agreement, including:
(a) the merger of the Company with and
into Acquisition;
(b) the execution, delivery, and
performance of the Employment Agreement;
(c) the performance by Buyer,
Acquisition, the Company and Sellers of their respective covenants and
obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation,
promise, or undertaking (whether written or oral and whether express or implied)
that is legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE SCHEDULE"--the disclosure schedule
delivered by Sellers and the Company to Buyer concurrently with the execution
and delivery of this Agreement.
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"EBITDA"--earnings before interest, taxes,
depreciation and amortization, as adjusted by Schedule 2.7.
"EFFECTIVE TIME"--as defined in Section 2.2.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option,
pledge, security interest, right of first refusal, or restriction of any kind,
including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT"--soil, land surface or subsurface
strata, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins, and wetlands), groundwaters, drinking water supply,
stream sediments, ambient air (including indoor air), plant and animal life, and
any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any
cost, damages, expense, liability, or obligation, arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or
conditions (including on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements,
legal or administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses arising
under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law
or Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative,
or remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response
action," include the types of activities covered by the United States
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
sec. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that
requires or relates to:
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(a) advising or notifying of appropriate authorities
and employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the
release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release
or minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent
in the transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(e) cleaning up pollutants that have been released,
preventing the threat of release, or paying the costs of such clean up or
prevention;
(f) pollution, contamination, protection of the
Environment, human health or safety.
"ERISA"--the Employee Retirement Income Security Act
of 1974 or any successor law, and regulations and rules issued pursuant to that
Act or any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent,
license, permit, waiver, or. other authorization issued, granted, given, or
otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village,
district, or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or
other government;
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(c) governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation,
handling, importing, management, manufacturing, processing, production,
refinement, Release, storage, transfer, transportation, treatment, or use of
Hazardous Materials in, on, under, about, or from the Facilities or any part
thereof into the Environment and any other act or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm to persons or
property on or off the Facilities, or that may affect the value of the
Facilities or the Company.
"HAZARDOUS MATERIALS"--any waste or other substance
that is listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"IPO"--Buyer's proposed initial public offering as
defined in Section 8.4.
"IRC"--the Internal Revenue Code of 1986 or any
successor law, and regulations issued by the IRS Pursuant to the Internal
Revenue Code or any successor law.
"IRS"--the United States Internal Revenue Service or
any successor agency, and, to the extent relevant, the United States Department
of the Treasury.
"KNOWLEDGE"--an individual will be deemed to have
"Knowledge" of a particular fact or other matter if such individual is actually
aware of such fact or other matter or (b) a prudent individual could be expected
to discover or otherwise become aware of such fact or other matter in the
ordinary course of business.
A Person (other than an individual) will be deemed to
have "Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director or executive officer of
such Person has, or at any time had, Knowledge of such fact or other matter.
"LEGAL REQUIREMENT"--any federal, state, local,
municipal, or other administrative order, constitution, law, ordinance,
regulation, or statute except for any Environmental Law.
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"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal
Requirement designed to provide safe and healthful working conditions and to
reduce occupational safety and health hazards, and any program designed to
provide safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any
court, administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" --an action taken by a
Person will be deemed to have been taken in the "Ordinary Course of Business"
only if:
(a) such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by
the board of directors of such Person (or by any Person or group of Persons
exercising similar authority); and
(c) such action is similar in nature and magnitude to
actions customarily taken, without any authorization by the Board of Directors
(or by any Person or group of Persons exercising similar authority), in the
ordinary course of the normal day-to-day operations of other Persons that are in
the same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or
certificate of incorporation and the bylaws of a corporation; (b) any charter or
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--an individual, corporation (including any
non-profit corporation), general or limited partnership, limited liability
company, joint venture, estate, trust, association, organization, labor union,
or other entity or Governmental Body.
"PROCEEDING"--any action, arbitration, audit,
hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any Governmental Body or arbitrator.
"PROMISSORY NOTE"--the Promissory Note described in
Section 2.7.
"RELATED PERSON"--with respect to a particular
individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly
controlled by such individual or one or more members of such individual's
Family;
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(c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual
or one or more members of such individual's Family serves as a director,
officer, partner, executor, or trustee (or in a similar capacity).
(e) For purposes of this definition, (a) the "Family"
of an individual includes (i) the individual, (ii) the individual's spouse,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule l3d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5 % of the
outstanding equity securities or equity interests in a Person.
"RELEASE"--any spilling, leaking, emitting,
discharging, depositing, escaping, leaching, dumping, or other releasing into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular
Person, any director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SELLERS"--as defined in the first paragraph of this
Agreement.
"SUBSIDIARY"--with respect to any Person (the
"Owner"), any corporation or other Person of which securities or other interests
having the power to elect a majority of that corporation's or other Person's
board of directors or similar governing body, or otherwise having the power to
direct the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that
survives the merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital
gains tax, value added tax, sales tax, property tax, gift tax, or estate levy),
levy, assessment, tariff, duty, deficiency, or other fee in any related charge
or amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable
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pursuant to any tax sharing agreement or any other contract relating to the
sharing or payment of any such tax, levy, assessment, tariff, duty, deficiency
or fee.
"TAX RETURN"--any return (including any information
return), report, statement, schedule, notice, form, or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a
Release that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action,
or other matter will be deemed to have been "threatened" if any demand or
statement has been made (orally or in writing) or any notice has been given
(orally or in writing) that would lead a Prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the
"Articles of Merger") shall be executed by the Company and Acquisition and shall
be filed with the Secretary of State of the States of California and Delaware.
The Merger shall become effective at such time as the Articles of Merger are
filed with the Secretary of State of the States of California and Delaware, such
time being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in
effect immediately prior to the Effective Time shall be and remain the Articles
of Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
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2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately
prior to the Effective Time shall be and remain the By-Laws Of the Surviving
Corporation from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Xxxxxx
X. Xxxxxx, Xx., [Buyer appointment] and Xxxxxxx Xxxx to be appointed as
directors of the Surviving Corporation. Xxxxxxx Xxxx and Xxxxxx X. Xxxxxx, Xx.
shall serve as the officers of the Surviving Corporation until their successors
have been elected or appointed and shall have qualified in accordance with
applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be
effective (i) on the date the conditions in Sections 7 and 8 have been satisfied
or otherwise waived, or (ii) at such other date as the parties hereto shall
agree in writing (the "Closing Date"), and shall be held at the offices of
Buyer's counsel at 000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000
at 10:00 a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the
Merger and without any action on the part of any holder of capital stock of
Buyer, Acquisition, the Company or Sellers: (1) the shares of Common Stock of
Acquisition purchased, issued and outstanding immediately prior to the Effective
Time shall be converted as a result of the Merger and without any action on the
part of the holder thereof, into 1 share of capital stock of the Surviving
Corporation and shall represent all the issued and outstanding shares of the
Surviving Corporation; and (ii) the shares of the Company held by Sellers (and
the other shareholders of the Company) shall be converted into and shall become,
without further action on the part of the Sellers and the other shareholders of
the Company, the right to receive the sum of (i) seven (7) times the Company's
actual adjusted EBITDA (as set forth in Schedule 2.7(a)) for the fiscal year
ending March 31, 1998, which shall be composed of the Company's pre-tax earnings
for the fiscal year ending March 31, 1998 plus the sum of (x) interest in an
amount not less than $310,000, (y) depreciation and amortization in an amount
not less than $200,000 and (z) the adjustments listed on Schedule 2.7(a) in the
amount of $217,000; plus (ii) the amount outstanding on that promissory note
(the "Promissory Note") issued by Sellers to the Company in the amount of
$875,000 on the date of this Agreement and which is expected to be about
$825,000 on the Closing Date (the "Purchase Price"). The Purchase Price shall be
reduced by (a) any amounts outstanding under the Company's line of credit with
San Xxxx National Bank on the Closing Date; (b) any accounts payable over 30
days on the Closing Date; (c) any negative cash balance per the Company's
financial records on the Closing Date; and (d) the amount of legal
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fees and costs incurred by the Company in connection with the negotiation and
documentation of this Agreement and the Employment Agreement that will have been
paid and/or remain payable on the Closing Date. The Purchase Price shall be
further adjusted (increased or decreased, as the case may be) by the difference
between the amount of accounts receivable (less than 90 days), inventory and
accounts payable on the Closing Date as compared to the amount of the Company's
accounts receivable (less than 90 days), inventory and accounts payable on
December 31, 1997. The consideration shall consist of shares of restricted
Common Stock of Buyer which number of shares of Common Stock shall be determined
by dividing the Purchase Price above by Buyer's initial public offering price
per share (the "IPO Price"), provided, however, that the consideration to be
received by shareholders, other than the Sellers, shall consist only of cash.
(b) By May 15, 1998, Buyer shall cause its
independent auditing firm to deliver to the Sellers a report of Adjusted EBITDA
of Company for the twelve (12) month period ended March 31, 1998, which shall
conform with the provisions of Section 2.7(a) hereof (the "EBITDA Certificate").
Buyer and Buyer's Representatives shall have full access to the books and
records of Acquisition and, to the extent relevant to prepare such certificates.
(c) The Sellers shall have a period of ten
(10) days after delivery of the EBITDA certificate, to present in writing to
Buyer, any objections that the Sellers may have to any of the matters set forth
in such certificate, which objection shall be set forth in reasonable detail. If
no objections are raised within such ten (10) day period, the certificate shall
be deemed accepted and approved by the Sellers. If the Sellers shall raise any
objections within the ten (10) day period, the parties shall attempt to resolve
the matter or matters in dispute. If such dispute cannot be resolved within a
further period of ten (10) days, the Sellers shall have the right to submit the
dispute to a nationally recognized firm of independent public accountants
mutually agreed to by Sellers and Buyer, which firm shall make a final and
binding determination as to such matter or matters in dispute. Each party shall
bear one-half of the fees and expense in connection with such review.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally
represent and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted
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by it, requires such qualification, except for any states wherein the failure
to be so qualified will not have a material effect on Company's financial
condition.
(b) Sellers have delivered to Buyer copies
of the Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal,
valid, and binding obligation of Sellers and the Company, enforceable against
Sellers and the Company in accordance with its terms subject to bankruptcy,
insolvency or other laws affecting the rights of creditors generally. Upon the
execution and delivery by Sellers of the Employment Agreement, the Employment
Agreement will constitute the legal, valid, and binding obligations of Sellers
enforceable against Sellers in accordance with its respective terms. Sellers and
the Company have the absolute and unrestricted right, power, authority, and
capacity to execute and deliver this Agreement and to perform their obligations
under this Agreement. The Company and its shareholders have approved this
Agreement under applicable state corporate law provisions, and such approval is
binding.
(b) Neither the execution and delivery of
this Agreement nor the consummation or performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time):
(i) contravene, conflict with, or result
in a violation of (A) any provision of the Organizational Documents of the
Company, or (B) any resolution adopted by the board of directors or the
shareholders of the Company;
(ii) contravene, conflict with, or
result in a violation of, or give any Governmental Body or other Person the
right to challenge any of the Contemplated Transactions or to exercise any
material remedy or obtain any material relief under, any Legal Requirement or
any Order to which the Company or Sellers, or any of the assets owned or used by
the Company, may be subject; or
(iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or
modify, any material Governmental Authorization that is held by the Company or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company.
(c) Sellers are acquiring the Buyer's Common
Stock for their own account and not with a view to its distribution within the
meaning of Section 2(11) of the Securities Act. Sellers are "accredited
investors" as such term is defined in Rule 501(a) under the Securities Act.
Sellers acknowledge that each certificate representing Buyer's Common Stock
acquired pursuant to this Agreement shall bear the following restrictive legend:
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THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE SOLD
OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE OF
THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
Sellers further acknowledge they each shall be subject to such "lock-up"
restriction as may be imposed by the Buyer's underwriter or any entity
regulating the issuance of the Buyer's Common Stock in its initial public
offering which "lock-up in no event shall exceed one (1) year.
(d) Prior to the Closing Date, Sellers and
the Company shall obtain written Consents in connection with the consummation or
performance of the Contemplated Transactions from the persons listed in Part
3.2(d) of the Disclosure Schedule. Sellers and the Company are not required to
obtain such written Consent from any other Person other than those listed on
Part 3.2(d) of the Disclosure Schedule.
3.3 CAPITALIZATION
The authorized equity securities of the Company
consist of 10,000 shares of common stock, with no par value, of which 754 shares
are issued and outstanding and constitute all the shares of the Company. The
Sellers are and will be on the Closing Date, the record and beneficial the
record owner and holder of 714 shares of the Company. On the Closing date, all
the shares of the Company will be free and clear of all Encumbrances. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable and except as disclosed in Part 3.3 of the
Disclosure Schedule, are free and clear of all Encumbrances. Except as set forth
on Section 3.3 to the Disclosure Schedule, there are no Contracts relating to
the issuance, sale, or transfer of any equity securities or other securities of
the Company. None of the outstanding equity securities or other securities of
the Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited
consolidated balance sheets of the Company as at September 30, 1996 and
September 30, 1997 ("Balance Sheet" ) and the related statements of income for
each of the fiscal years then ended and (b) an unaudited balance sheet of the
Company as of December 31, 1997 (the "Interim Balance Sheet") and the related
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statement of income for the three (3) months then ended. Except as disclosed
on Part 3.4 of the Disclosure Schedule such financial statements and notes
fairly present in all material respects the financial condition and the results
of operations of the Company as at the respective dates of and for the periods
referred to in such financial statements subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse).
3.5 BOOKS AND RECORDS
The books of account, minute books, and stock record
books, all of which have been made available to Buyer, are, complete and correct
in all material respects. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
Shareholders and the Board of Directors of the Company. At the Closing, all of
those books and records will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Schedule contains a
complete and accurate list of all real property, leaseholds, or other interests
therein owned by the Company. Sellers have delivered or made available to Buyer
copies of the deeds and leases and other instruments by which the Company
occupies or acquired such real property and interests and such instruments are
true, complete and accurate. The Company owns (with good and marketable title in
the case of real property) or leases all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that it purports to
own or lease located in the facilities owned or operated by the Company and
reflected as owned or leased in the books and records of the Company, including
all of the properties and assets reflected in the Balance Sheet and the Interim
Balance Sheet (except for assets held under capitalized leases disclosed or not
required to be disclosed in Part 3.6 of the Disclosure Schedule and
personal property sold since the date of the Balance Sheet, as the case may be,
in the Ordinary Course of Business), and all of the properties and assets
purchased or otherwise acquired by the Company since the date of the Balance
Sheet and the Interim Balance Sheet (except for personal property acquired and
sold since the date of the Balance Sheet in the Ordinary Course of Business and
consistent with past practice), which subsequently purchased or acquired
properties and assets (other than inventory and short-term investments) are
listed in Part 3.6 of the Disclosure Schedule. All material properties and
assets reflected in the Balance Sheet and the Interim Balance Sheet are free and
clear of all Encumbrances except with respect to all such properties and assets,
(a) mortgages or security interests shown on the Balance Sheet or the Interim
Balance Sheet as securing specified liabilities or obligations, with respect to
which no default (or event that, with notice or lapse of time or both, would
constitute a default) exists, (b) mortgages or security interests incurred in
connection with the purchase of property or assets after the date of the Interim
Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which to the Knowledge of
Company and the Sellers, no default (or event that, with notice or lapse of time
or both, would constitute a default) exists, (c) liens for current taxes not yet
due, and (d) with respect to real property, (i) minor imperfections of title, if
any, none of
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which is substantial in amount, materially detracts from the value
or materially impairs the use of the property subject thereto, or impairs the
operations of the Company, (ii) zoning laws and other land use restrictions that
do not impair the present use of the property subject thereto, and (iii) except
as set forth in Part 3.6 of the Disclosure Schedule, all UCC-1 filings of record
represent current, validly existing encumbrances on the Company's assets.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
Except as provided in Part 3.7 of the Disclosure
Schedule, to the Knowledge of Company and the Sellers, the buildings, plants,
structures, and equipment of the Company are structurally sound, in good
operating condition and repair, and adequate for the uses to which they are
being put, and none of such buildings, plants. structures, or equipment is in
need of significant maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
3.8 ACCOUNTS RECEIVABLE
Except as provided in Part 3.8 of the Disclosure
Schedule, all accounts receivable of the Company that are reflected on the
Balance Sheet and the Interim Balance Sheet or on the accounting records of the
Company (collectively, the "Accounts Receivable") represent valid obligations
arising from sales actually made or services actually performed in the Ordinary
Course of Business. Unless paid prior to the date hereof, the Accounts
Receivable are current (in accordance with the terms of agreements between
Company and its customers) and collectible shown on the Balance Sheet and the
Interim Balance Sheet of the Company. To the Knowledge of Company and the
Sellers, there is no contest, claim, or right of set-off, other than returns in
the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Sellers have delivered or made available to Buyer a complete and
accurate list of all Accounts Receivable as of the date of the Interim Balance
Sheet, which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet, or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete items
and items of below-standard quality, which in no event exceeds $25,000. All
inventories not written off have been priced at the net realizable value on and
average cost basis. The quantities of each item of inventory are reasonable in
the present circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Schedule,
the Company has no material liabilities or obligations of any nature except for
liabilities or obligations reflected in the
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Balance Sheet and current liabilities incurred in the Ordinary Course of
Business since the date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed all
Tax Returns that are or were required to be filed by or with respect to it
pursuant to applicable Legal Requirements. Sellers have delivered or made
available to Buyer copies of, and Part 3. 11 of the Disclosure Schedule
contains, a complete and accurate list of, all such Tax Returns filed by the
Company since December 31, 1993. The Company has paid or made provision for the
payment of all Taxes that have become due pursuant to those Tax Returns or
pursuant to any assessment received by the Company, except such Taxes, if any,
as are listed in Part 3.11 of the Disclosure Schedule and are being contested in
good faith have been provided in the Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure
Schedule, no United States federal income Tax Returns have been audited by the
IRS. Part 3.11 of the Disclosure Schedule describes all adjustments to the
United States federal income Tax Returns filed by the Company or any group of
corporations including the Company for all taxable years since December 31,
1993, and the resulting deficiencies proposed by the IRS. Except as described in
Part 3.11 of the Disclosure Schedule, the Company has not given or been
requested to give waivers or extensions (or is or would be subject to a waiver
or extension given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company may be liable.
(c) The charges and accruals with respect to Taxes on
the respective books of the Company are adequate. To the Knowledge of Company
and the Sellers, there exists no proposed tax assessment against the Company
except as disclosed in the Balance Sheet or in Part 3.11 of the Disclosure
Schedule. No consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired, or to be acquired
by the Company. All taxes that the Company is or was required by Legal
Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body or other
Person.
(d) All Tax Returns filed by the Company are true,
correct, and complete in material respects. There is no tax sharing agreement
that will require any payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, no event has occurred or circumstance
exists that may result in such a material adverse change.
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3.13 EMPLOYEE BENEFITS
Sellers have delivered to Buyer copies of the Company's group
medical insurance plan, associated life insurance plan, and 401(k) Plan. Part
3.13 of the Disclosure Schedule contains a list of such plans. Other than the
plans listed in Part 3.13, the Company has not contributed to any pension,
profit sharing or other employee benefit plan and does not have any obligation
to, or customary arrangement with, former employees, if any, for bonuses,
incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the
Disclosure Schedule and further except for such matters which would not be
reasonably expected to have (individually or in the aggregate) a material
adverse effect on the Company:
(i) the Company has not received any notice that
it is in violation of any Legal Requirement that is applicable to it or to the
conduct or operation of its business or the ownership or use of any of its
assets; and
(ii) no event has occurred or circumstance exists
that in any material respect (A) will constitute a violation by the Company of,
or a failure on the part of the Company to comply with, any Legal Requirement or
(B) will give rise to any obligation on the part of the Company to undertake, or
to bear all or any portion of the cost of, any remedial action of any nature;
(b) Part 3.14 of the Disclosure Schedule contains a
complete and accurate list of each Governmental Authorization that is held by
the Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company (all of which authorizations have been
delivered to Buyer. Each Governmental Authorization listed or required to be
listed in Part 3.14 of the Disclosure Schedule is valid and in full force and
effect. Except as set forth in Part 3.14 and further except for such matters
which would not be reasonably expected to have (individually or in the
aggregate) a material adverse effect on the Company:
(i) to the knowledge of Sellers or the Company,
no event has occurred or circumstance exists that (A) constitutes in a violation
of or a failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Schedule, or (B) results in the revocation, withdrawal, suspension,
cancellation, or termination of any Governmental Authorization listed in Part
3.14 of the Disclosure Schedule; and
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(ii) the Company has not received any notice from
any Governmental Body regarding (A) any actual violation of or failure to comply
with any term or requirement of any Governmental Authorization, or (B) any
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization;
(c) The Governmental Authorizations listed in Part
3.14 of the Disclosure Schedule, collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
its business in the manner it currently conducts and operates such business and
to permit the Company to own and use its assets in the manner in which it
currently owns and uses such assets except where the failure to obtain a
Governmental Authorization would not result in a material adverse effect on the
Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the
Disclosure Schedule, there is no pending Proceeding:
(i) that has been commenced by or against the
Company that relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions.
To the Knowledge of Sellers and the Company, no
such Proceeding as described above has been Threatened. Sellers have made
available to Buyer copies of all pleadings, correspondence, and other documents
relating to each Proceeding listed in Part 3.15 of the Disclosure Schedule.
(b) Except as set forth in Part 3.15 of the
Disclosure Schedule:
(i) there is no Order to which the Company, or
any of the assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that
relates to the business of, or any of the assets owned or used by, the Company;
and
(iii) no officer, director, or employee of the
Company is subject to any Order that prohibits such officer, director, or to the
Knowledge of the Company and the Sellers, employee from engaging in or.
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.15 of the
Disclosure Schedule:
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(i) no event has occurred or circumstance exists
that constitutes a violation of any material term or requirement of any Order to
which the Company, or any of the assets owned or used by the Company, is
subject; and
(ii) the Company has not received any notice from
any Governmental Body regarding any violation of, or failure to comply with, any
term or requirement of any Order to which the Company, or any of the assets
owned or used by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Schedule,
since the date of the Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized capital stock;
grant by the Company of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock; or
declaration or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any
bonuses, salaries, distributions or other compensation to any shareholder,
director, officer, or employee.
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of the Company;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000.
(g) except in the Ordinary Course of Business, sale,
lease, or other disposition of any asset or property (other than inventory in
the Ordinary Course of Business) of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any
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material asset or property of the Company, including the sale, lease, or other
disposition of any of the intellectual property assets;
(h) cancellation or waiver of any claims or rights
with a value to the Company in excess of $25,000 ;
(i) material change in the accounting methods used by
the Company; or
(j) agreement by the Company to do any of the
foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Schedule contains
a complete and accurate list, and Sellers have delivered or made available to
Buyer true and complete copies of:
(i) each Applicable Contract that involves
performance of services or delivery of goods or materials by the Company of an
amount or value in excess of $25,000;
(ii) each Applicable Contract that involves
performance of services or delivery of goods or materials to the Company of an
amount or value in excess of $25,000;
(iii) each Applicable Contract that was not
entered into in the Ordinary Course of Business and that involves expenditures
or receipts of the Company in excess of $25,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other Applicable
Contract affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real or personal property of the Company
(except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $25,000
and with terms of less than one year);
(v) each licensing agreement or other Applicable
Contract with the Company with respect to patents, trademarks, copyrights, or
other intellectual property, including agreements with current or former
employees, consultants, or contractors regarding the appropriation or the
nondisclosure of any of the Intellectual Property Assets;
(vi) each collective bargaining agreement and
other Applicable Contract to or with any labor union or other employee
representative of a group of employees;
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(vii) each joint venture, Partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(viii) each Applicable Contract containing
covenants that in any way purport to restrict the business activity of the
Company or any Affiliate of the Company or limit the freedom of the Company or
any Affiliate of the Company to engage in any line of business or to compete
with any Person;
(ix) each Applicable Contract providing for
payments to or by any Person based on sales, purchases, or profits, other than
direct payments for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company
that is currently effective and outstanding;
(xi) each Applicable Contract entered into other
than in the Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $25,000;
(xiii) each currently effective written warranty,
guaranty, indemnity, and or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business;
(xiv) each Contract for indebtedness of the
Company involving future aggregate payments of more than $25,000; and
(xv) each written amendment, supplement, and
modification [(whether oral or written)] in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the
Disclosure Schedule.
(i) Sellers (and no Related Person of the
Sellers) do not have any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(c) To the Knowledge of Company and the Sellers,
except as set forth in Part 3.17(c) of the Disclosure Schedule, each Contract
identified in Part 3.17(a) of the Disclosure Schedule is in full force and
effect.
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(d) Except as set forth in Part 3.17(d) of the
Disclosure Schedule:
(i) the Company is, and at all times has been, in
material compliance with all applicable terms and requirements of each Contract
under which the Company has or had any material obligation or liability or by
which the Company or any of the material assets owned or used by the Company is
or was bound;
(ii) the Company has not received any notice
regarding any actual or alleged violation or breach of, or default under, any
Applicable Contract.
(e) To the Knowledge of the Company or Sellers there
are no renegotiations of, attempts to renegotiate, or outstanding rights to
renegotiate any material amounts paid or payable to the Company under current or
completed Applicable Contracts with any Person and, to Sellers' Knowledge, no
such Person has made written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business
(g) The Company has made available to Buyer true,
complete and correct copies of the Contracts required to be set forth in Part
3.17 of the Disclosure Schedule.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the Company is covered;
and
(ii) true and complete copies of all pending
applications for policies of insurance.
(b) Part 3.18(b) of the Disclosure Schedule
describes:
(i) any self-insurance arrangement by or
affecting the Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a
policy of insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third
parties with respect to insurance (including such obligations under leases and
service agreements) and identifies the policy under which such coverage is
provided.
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(c) To the Knowledge of Company and the Sellers, all
material assets, properties and risks of the Company are covered by valid and,
except for policies that have expired under their terms in the ordinary course,
currently effective insurance policies or binders of insurance (including,
without limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company. There has
not been any claim under any such insurance policy during the past three years
that could reasonably be expected to have a material adverse effect on the
Company.
(d) Except as set forth on Part 3.18(d) of the
Disclosure Schedule:
(i) Since January 1, 1993 the Company has not
received (A) any refusal of coverage or any notice that a defense will be
afforded with reservation of rights, or (B) any notice of cancellation or any
other indication that any insurance policy is no longer in full force or effect
or will not be renewed or that the issuer of any policy is not willing or able
to perform its obligations thereunder.
(ii) The Company has paid all premiums due, and
to the Knowledge of Company and the Sellers, has otherwise performed all of its
obligations, under each policy to which the Company is a party or that provides
coverage to the Company or director thereof.
(iii) The Company has given notice to the insurer
of all MATERIAL claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in Part 3.19 of the Disclosure Schedule:
(a) The Company is and at all times has been in
material compliance with all applicable Environmental Laws. Neither Sellers nor
the Company has any reasonable basis to expect, nor has any of them received,
any actual or Threatened Order, notice, or other communication from (i) any
Governmental Body or private citizen acting in the public interest, or (ii) the
current or prior owner or operator of any Facilities, of any actual or potential
violation or failure to comply with any Environmental Law on the part of the
Company, or of any actual or Threatened obligation to undertake or bear the cost
of any Environmental, Health, and Safety Liabilities with respect to Hazardous
Activity or Hazardous Materials or any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which the Company has had an
interest, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by the Company, or from which Hazardous Materials have been
transported, treated, stored, handled, transferred, disposed, recycled, or
received.
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(b) There are no pending or, to the Knowledge of
Sellers and the Company, Threatened claims, Proceedings or Encumbrances against
Sellers or the Company relating to any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with respect
to or affecting any of the Facilities or any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(c) Neither Sellers or the Company has any reasonable
basis to expect, nor has any of them received, any citation, directive, inquiry,
notice, Order, summons, warning, or other communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and
Safety Liabilities with respect to the Facilities or with respect to any other
properties and assets (whether real, personal, or mixed) in which the Company
(or any predecessor), has or had an interest except for such matters which have
not nor would have a material adverse effect on the Company.
(e) Except as set forth on Paragraph 3.19 of the
Disclosure Schedule, there are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials contained in
barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the Facilities, or incorporated into any structure therein or thereon except for
such matters which have not nor would have a material adverse effect on the
Company. The Company has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest
except for such matters which have not nor would have a material adverse effect
on the Company.
(f) Sellers have delivered to Buyer, or have
otherwise made available, true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed by Sellers or the Company
pertaining to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by the Company with Environmental Laws.
(g) To the best of Sellers' and the Company's
Knowledge, there are no underground or above-ground storage tanks, incinerators
or surface impoundments at, on, or about under or within any real property
operated or controlled, in whole or in part by the Company.
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3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Schedule contains a
complete and accurate list of the following information for each employee or
director of the Company, including each employee on leave of absence or layoff
status: employer; name; job title; current compensation paid or payable and any
change in compensation since December 31, 1997; vacation accrued; and service
credited for purposes of vesting and eligibility to participate under the
Company's insurance, medical, welfare, or vacation plan, or any other employee
benefit plan.
(b) No key employee or director of the Company is a
party to, or is otherwise bound by, any agreement or arrangement, including any
confidentiality, non-competition, or proprietary rights agreement, between such
employee or director and any other Person ("Proprietary Rights Agreement") that
in any way adversely affects or will affect (i) the performance of his duties as
an employee or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with Sellers or
the Company by any such employee or director. Company and the Sellers have not
received any notice that any director, officer or other key employee intends to
terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company is not a party to any collective bargaining or
other labor Contract. There has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding presently commenced against the Sellers and/or Company or otherwise
affecting the Company relating to the alleged violation of any material Legal
Requirement pertaining to labor relations or employment matters, specifically
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To the Knowledge
of Company and Sellers, no violation of any material Legal Requirement exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by the Company. The Company has substantially
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any
patents, trademarks, trade names, service marks, mask works or copyrights, other
than the common trade law names listed on Part 3.22 of the Disclosure Schedule.
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(b) To the Knowledge of Company and the Sellers,
there has not been any actual or alleged infringement or use or misuse by any
party of the Company's trade secrets, confidential information or other
intellectual property rights except as listed on Part 3.22 of the Disclosure
Schedule.
3.23 CERTAIN PAYMENTS
No director or executive officer nor, to the Knowledge of
Company and the Sellers, the Company nor any agent or employee of the Company
has (a) made any contribution, gift, bribe, rebate, payoff, influence payment or
kickback to any person, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company or (b)
established or maintained any fund or asset that has not been recorded in the
books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of the Company in
this Agreement and no statement in the Disclosure Schedule knowingly omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will
knowingly contain any untrue statement or knowingly omit to state a material
fact necessary to make the statements therein in light of the circumstances in
which they were made, not misleading.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Neither Sellers nor any Related Person of Sellers or of the
Company has any interest in any property (whether real, personal, or mixed, used
in or pertaining to the Company's business. Neither Sellers or any Related
Person of Sellers or of the Company owns (of record or as a beneficial owner) an
equity interest or any other similar financial or profit interest in, a Person
that (i) has business dealings or a material financial interest in any
transaction with the Company, or (ii) engages in competition with the Company
with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.25 of the Disclosure Schedule, neither Sellers or any
Related Person of Sellers or of the Company is a party to any Contract with, or
has any claim or right against the Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
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3.27 LINE OF CREDIT
Amounts outstanding under the Company's line of credit shall
in no event exceed $1,150,000.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND
BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and
severally represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is and will be on the Closing Date, a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of Acquisition and Buyer has the corporate power and authority to
own or lease and operate its properties to carry on its business as now being
conducted, and is duly qualified and in good standing and authorized to do
business as a foreign corporation in each jurisdiction in which the character of
its properties or the nature of its business requires on such qualification and
authorization except where the failure to so qualify would not have a material
adverse effect on the Buyer or Acquisition.
4.2 AUTHORITY
(a) Each of Acquisition and Buyer has the corporate
power and has taken all necessary corporate action to authorize Acquisition or
Buyer as the case may be, to execute, deliver and perform the Agreement and to
consummate the transactions contemplated thereby. The execution and delivery by
each of Acquisition and Buyer of this Agreement and the Employment Agreement to
which each is a party constitutes the legal, valid and binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
(b) Neither the execution and delivery of this
Agreement nor the consummation or performance of any of the Contemplated
Transactions will:
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Buyer and
Acquisition, or (B) any resolution adopted by the board of directors or the
stockholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body the right to challenge any of the
Contemplated Transactions or to exercise any material remedy or obtain any
material relief under, any material Legal Requirement to which Buyer as
Acquisition may be subject; or
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(iii) contravene, conflict with, or result in a
violation of any of the terms or requirements of, or give any Governmental Body
the right to revoke, withdraw, suspend, cancel, terminate, or modify, any
material Governmental Authorization that is held by the Buyer or Acquisition or
that otherwise relates to the business of, or any of the assets owned or used
by, the Company;
4.3 CAPITALIZATION
(a) As of the date hereof, the authorized common
stock of the Buyer consist of 50,000,000 shares of common stock, $.001 par value
per share, of which 4,712,372 shares are issued and outstanding (subject to
increases for Acquisitions and the IPO). All of the outstanding common stock of
the Buyer has been duly authorized and validly issued and are fully paid and
nonassessable. The shares of the Buyer's Common Stock to be delivered to Sellers
at Closing pursuant to Section 2.7 will be duly authorized, validly issued,
fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Buyer, are complete, in all material respects, and collect
and have been maintained in accordance with sound business practices, including
the maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no Pending Proceeding that has been commenced against
Buyer or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the contemplated
transactions. To Buyer's and Acquisition's Knowledge, no such proceeding has
been threatened.
4.6 BROKERS OR FINDERS
Buyer and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents, commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Company and Sellers harmless from
any such payment alleged to be due by or through Buyer or Acquisition as a
result of the action of Buyer and Acquisition or their officers or agents.
4.7 DISCLOSURE
Buyer has delivered to Sellers disclosure information
concerning Buyer, its management, its financial statements, its proposed IPO,
its proposed acquisitions other than the Contemplated Transactions (collectively
the "Disclosure Documents"). All the information in such Disclosure Documents is
true and correct in all material respects.
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5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING
DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
properties (including subsurface testing), contracts, books and records, and
other documents and data during normal business hours, (b) furnish Buyer and
Buyer's Advisors with copies of all such contracts, books and records, and other
existing documents and data pertaining to the Company as Buyer may reasonably
request, and (c) furnish Buyer and Buyer's Advisors with such additional
financial, operating, and other data and information pertaining to the Company
as Buyer may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will cause the Company to:
(a) conduct the business of the Company only in the
Ordinary Course of Business;
(b) preserve intact the current business organization
of the Company, use his best efforts to keep available the services of the
current officers, employees, and agents of the Company, and to maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters
of a material nature; and
(d) otherwise report periodically to Buyer concerning
the status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement or
approved by Buyer between the date of this Agreement and the Closing Date,
Sellers will not and will cause the Company not to, without the prior consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.
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5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Sellers will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date,
Sellers will promptly notify Buyer in writing if Sellers become aware of any
fact or condition that causes or constitutes a Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if Sellers
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Schedule if the Disclosure Schedule were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Disclosure Schedule specifying such change.
During the same period, Sellers will promptly notify Buyer of the occurrence of
any Breach of any covenant of Sellers in this Section 5 or of the occurrence of
any event that may make the satisfaction of the conditions in Section 7
impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 9, Sellers will not, and the Company will not and each of
their Representatives will not directly or indirectly solicit, or initiate or
encourage, accept or discuss any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer)
relating to any transaction involving the sale of the business or assets of the
Company, or any of the capital stock of the Company, or any merger,
consolidation, business combination, or similar transaction involving the
Company. Sellers or the Company will promptly notify Buyer of any such inquiries
or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date,
Sellers and the Company will use their Best Efforts to cause the conditions in
Section 7 to be satisfied.
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6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer
will promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or Acquisition's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement or any fact or
condition that would, except as expressly contemplated by this Agreement, cause
or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS/EXPENSES
Between the date of this Agreement and the Closing Date, Buyer
will use its Best Efforts to complete the IPO of Buyer's securities and to cause
the conditions in Section 8 to be satisfied. In connection with the Contemplated
Transactions, Buyer agrees to bear all expenses and fees of Xxxxx Xxxxxxxx
incurred in connection with the audit of the Company's financial statements. In
the event that the Initial Public Offering is not completed prior to September
30, 1998, or this Agreement is terminated by Sellers, Buyer will reimburse
Company for legal and accounting fees and costs of Company incurred in
connection with the contemplated transactions in an amount not to exceed Twenty
Thousand Dollars ($20,000) subject to appropriate documentation.
6.3 COMPLIANCE WITH SECURITIES LAWS
Buyer shall comply with the Securities Act in all material
respects in connection with its issuance of shares in its IPO. After such time
as a public market exists for the Shares, the Buyer agrees to: (a) make and keep
public information available, as those terms are understood and defined in Rule
144 under the Securities Act, and (b) for a period of two years from Closing
file with the Commission in a timely manner all reports and other documents
required of the Buyer under the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements).
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S
OBLIGATION TO CLOSE
Buyer's and Acquisition's obligations to consummate the Merger
and to take the other actions required to be taken by Buyer and Acquisition at
the Closing is subject to the satisfaction, at or prior to the Closing of each
of the following conditions (any of which may be waived by Buyer and
Acquisition, in whole or in part):
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7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Schedule.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers
and the Company are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing, must have been duly performed and complied
with in all material respects.
(b) There shall be delivered at Closing (i) the
Employment Agreement with Xxxxxxx Xxxx ("Xxxx") as of the Closing Date in the
form of Exhibit 7.2(b)(i) (the "Employment Agreement") executed by Xxxx; (ii)
the certificate executed by Sellers and an officer of the Company representing
to Buyer and Acquisition that Sellers' and the Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date; (iii) a schedule dated the day prior to
Closing documenting the difference in Company payables, receivables (less than
90 days) and inventory from December 31, 1999 and the amount due under the
Promissory Note; and (iv) each of the other covenants and obligations in the
Agreement must have been performed and complied with in all respects.
7.3 CONSENTS
Each of the consents identified in Part 3.2(d) of the
Disclosure Schedule, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of Xxxxxx & Xxxxx, LLP dated the
Closing Date, reasonably acceptable to Buyer;
(b) such other documents as Buyer or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of
Sellers' and the Company's representations and warranties, (iii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the Company
with, any covenant or obligation required to be performed or complied with by
such party, (iv) evidencing the satisfaction of any condition referred to in
this Section 7, or (v) otherwise facilitating the consummation or performance of
any of the Contemplated Transactions.
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7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, Pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER
PROCEEDS
There must not have been made or Threatened by any Person any
claim asserting that such Person (a) is the holder or the beneficial owner of,
or has the right to acquire or to obtain beneficial ownership of, any stock of,
or any other voting, equity, or ownership interest in, the Company, or (b) is
entitled to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in the
business, operations, prospects, financial condition or results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
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7.11 PROMISSORY NOTE
Xxxxxxx Xxxx and Company shall have entered into a revised
Promissory Note as of the Closing, which shall provide for interest at the rate
of six percent (6%) per annum, to be paid on the annual anniversary of the
revised Promissory Note, with all principal due and payable on the third
anniversary of such note, and which shall be secured by a number of shares of
Buyer's Common Stock issued to Sellers in this Agreement equal to the principal
amount of the revised Promissory Note divided by the IPO Price. Such shares
shall be released upon the full payment of such Promissory Note, which may be
prepaid at any time without penalty.
7.12 XXXXX CONSENT
The conditions to release of a security interest presently
held by Xx. Xxxxx in shares of Company common stock owned by Xxxxxxx Xxxx has
been satisfied and Xx. Xxxxx has executed the Lock-Up Agreement proposed by
Buyer's underwriters.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S
OBLIGATION TO CLOSE
Sellers' and the Company's obligations to consummate the
Merger and to take the other actions required to be taken by Sellers and the
Company at the Closing is subject to the satisfaction, at or prior to the
Closing, of each of the following conditions (any of which may be waived by
Sellers and the Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, without giving effect to any
Supplement to the Buyer's Disclosure Schedule.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer
and Acquisition are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
(b) Buyer must have executed and delivered (i) the
Employment Agreement (ii) a certificate executed by an officer of Buyer
representing to Sellers that Buyer and Acquisition's representations and
warranties contained in this Agreement were accurate in all material respects as
to the date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing.
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8.3 ADDITIONAL DOCUMENTS
Buyer and Acquisition must have caused the following documents
to be delivered to Sellers:
(a) an opinion of Atlas, Xxxxxxxx, Trop & Borkson,
P.A., dated the Closing Date, reasonably acceptable to Sellers; and
(b) such other documents as Sellers or its counsel
may reasonably request for the purpose of (i) enabling its counsel to provide
the opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 7, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
8.4 INITIAL PUBLIC OFFERING
Buyer shall have completed an initial public offering of its
Common Stock in compliance with the Securities Act as a result of which shares
of Buyer's Common Stock are traded on a national securities exchange or the
NASDAQ Stock Market.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
(a) by either Buyer and Acquisition or Sellers and
the Company if a material Breach of any provision of this Agreement has been
committed by the other party and such Breach has not been cured or waived within
15 days of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the
conditions in Section 7 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Buyer to comply with its obligations under this Agreement) and
Buyer has not waived such condition on or before the Closing Date; or (ii) by
Sellers and the Company, if any of the conditions in Section 8 has not been
satisfied of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Sellers and the Company to
comply with their obligations under this Agreement) and Sellers have not waived
such condition on or before the Closing Date;
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(c) by mutual consent of Buyer and Acquisition and
Sellers and the Company; or
(d) by either Buyer and Acquisition or Sellers and
the Company if the Closing has not occurred (other than through the failure of
any party seeking to terminate this Agreement to comply fully with its
obligations under this Agreement) on or before September 30, 1998, or such later
date as the parties may agree upon.
A party's right of termination under Section 9.1 is
in addition to any other rights it may have under this Agreement or otherwise,
the exercise of a right of termination will not be an election of remedies. If
this Agreement is terminated pursuant to Section 9.1, all further obligations of
the parties under this Agreement terminate, except the obligations in Section
11.1 and 11.3 will survive; provided, however, that if this Agreement is
terminated by a party because of a breach of the Agreement by the other party or
because one or more of the conditions to the terminating party's obligations is
not satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Schedule and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing until eighteen (18) months from the Closing except for the
representations and warranties in Section 3.3, which shall survive for the
applicable statute of limitations and the representations and warranties in
Sections 3.11 and 3.19, which shall survive for thirty-six (36) months from
Closing. The waiver of any condition based on the accuracy of any representation
or warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to indemnification, payment of Damages, or
other remedy based on such representations, warranties, covenants, and
obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will indemnify and hold harmless Buyer, Acquisition,
the Surviving Corporation, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss, liability,
claim, damage, expense (including costs of investigation and defense and
reasonable attorneys' and other professional fees) whether or not involving a
third-party claim (collectively, "Damages"), arising, from or in connection
with:
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(a) any Breach of any representation or warranty made
by Sellers or Company in this Agreement, the Disclosure Schedule and any of the
supplements thereto, or any other certificate or document delivered by Sellers
or Company pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any
covenant or obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by
Company prior to the Closing Date; and
(d) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Sellers or the
Company (or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
The remedies provided in this Section 10.2 will not be
exclusive of or limit any other remedies that may be available to Buyer or the
other Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for, and will
pay to the Sellers the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees) whether or not involving a third-party claim
(collectively, "Damages"), arising from or in connection with:
(a) any Breach of any representation or warranty made
by Buyer in this Agreement or any certificate or document delivered by Buyer
pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or obligation
of Buyer in this Agreement;
(c) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions.
The remedies provided in this Section 10.3 will not be
exclusive of or limit any other remedies that may be available to Sellers.
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10.4 TIME LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Sections 3.3, 3.11 and 3.19, unless on or before
eighteen (18) months from the date of Closing, Buyer notifies Sellers of a claim
specifying the factual basis of that claim. A claim with respect to Section 3.3
may be made at any time prior to the applicable statute of limitations with
respect to such matter. A claim with respect to Sections 3.11 and 3.19 may be
made at any time thirty-six (36) months from the date of Closing.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and to comply with prior to the Closing
Date, unless on or before eighteen (18) months from the date of Closing, Sellers
notify Buyer of claims specifying the factual basis of that claim.
10.5 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party
under Sections 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnified party's failure
to give such notice.
(b) If any Proceeding referred to in Section 10.5(a)
is brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such proceeding), to assume the defense of such Proceeding with
counsel satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified Party in connection with the defense of such Proceeding If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the
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indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to an
indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any Compromise or settlement effected without its consent (which may
not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION-OTHER CLAIMS
A claim may be asserted by notice to the party from whom
indemnification is sought.
10.7 LIMITATIONS ON LIABILITY
Notwithstanding any other provision of this
Agreement, (i) no party shall be entitled to indemnification for Damages; unless
and only to the extent that such Damages exceed Seventy-Five Thousand Dollars
($75,000.00); (ii) in no event shall the aggregate liability of Sellers exceed
Three Million Dollars ($3,000,000) except with respect to Sections 3.3, 3.11 and
3.19, the aggregate liability for breach of any such section shall not exceed
the purchase price in Section 2.7, and (iii) in no event shall the aggregate
liability of Buyer and Acquisition exceed $3,000,000).
10.8 INSURANCE POLICIES
Buyer agrees to either purchase or maintain the
Company's "occurrence based" insurance policy for a period of eighteen (18)
months from Closing.
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11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to
this Agreement or the Contemplated Transactions will be issued, if at all, at
such time and in such manner as Buyer determines and Company agrees. Unless
consented to by Buyer in advance or required by Legal Requirements, prior to the
Closing Sellers shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person other than their professional advisors. Sellers and Buyer will consult
with each other concerning the means by which the Company's employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date,
Buyer and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose information
about this Agreement, the Sellers, or the Company in connection with its initial
public offering and any related obligations therewith.
(b) If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by
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registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
Sellers: Sierra Office Systems and Products, Inc.
0000 Xxxx Xxxx, Xxxxx 0
Xxxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx Xxxx
Facsimile No.: (000) 000-0000
with a copy to: Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
Buyer or Acquisition: Office Centre Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Facsimile No.: (000) 000-0000
with a copy to: Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by
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applicable law, (a) no claim or right arising out of this Agreement or the
documents referred to in this Agreement can be discharged by one party, in whole
or in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
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11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or
referred to in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of
Delaware without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original copy of this Agreement and all of
which, when taken together, will be deemed to constitute one and the same
agreement.
11.14 TAXES
Buyer and Sellers will each pay one-half pay all sales,
transfer and documentary taxes, if any, payable in connection with the
Contemplated Transactions.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION
By: /s/ X. X. Xxxxxx, Xx. /s/ Xxxxxxx Xxxx
--------------------------- -------------------------
Name: XXXXXX X. XXXXXX, XX. XXXXXXX XXXX
Title:
/s/ Xxxx X. Xxxx, Xx.
---------------------
XXXX X. XXXX, XX.
ACQUISITION:
OFFICE CENTRE SACRAMENTO /s/ Rose Xxxxx Xxxx
---------------------
ROSE XXXXX XXXX
By: /s/ X. X. Xxxxxx, Xx.
---------------------------
Name: XXXXXX X. XXXXXX, XX.
Title:
COMPANY:
SIERRA OFFICE SYSTEMS AND
PRODUCTS, INC.
By: /s/ Xxxxxxx Xxxx
-----------------------------
Name: Xxxxxxx Xxxx
Title: President
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SIERRA OFFICE SYSTEMS AND PRODUCTS, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 3.1 Organization and Good Standing
Exhibit 3.3 Capitalization
Exhibit 3.4 Financial Statements
Exhibit 3.6 Equipment Leases
Exhibit 3.8 Accounts Receivable
Exhibit 3.11 Taxes
Exhibit 3.13(a) Group Medical Plan
Exhibit 3.14 Government Licenses
Exhibit 3.15 Legal Proceedings; Orders
Exhibit 3.17 Contracts; No defaults
Exhibit 3.18 Insurance
Exhibit 3.19 Environmental Matters
Exhibit 3.20 Employees
Exhibit 3.21 Employee Manual
Exhibit 3.22 Intellectual Property
Exhibit 3.27 Line of Credit
Exhibit 7.2(b)(i) Form of XXXX Employment Agreement
SCHEDULES
---------
Schedule 2.7(a) EBITDA Calculation
Schedule 3.2 Authority; No conflict
Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.6 Real Property; Encumbrances
Schedule 3.7 Condition and Sufficiency of Assets
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
Schedule 3.13 Employee Benefits
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.17 Contracts; No defaults
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.22 Intellectual Property
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
