EXHIBIT 2 STOCK PURCHASE AGREEMENT
Stock Purchase Agreement made effective as of January 1, 1999 between
Officeland Inc., an Ontario corporation with principal offices located at 000
Xxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (the "Buyer"), and Xxxx
X'Xxxxxx, an individual residing at 000 Xxxx Xxx Xxxxx, Xxxxxxxxx, Xxxxxxxxxxx
00000 (the "Seller"). The Buyer and Seller are referred to herein collectively
as the "Parties," and individually as a "Party."
WHEREAS the Seller owns all of the outstanding capital stock of Eastern
Equipment Brokers, Inc. (the "Subject Shares"), a Connecticut corporation with
principal offices located at 00 Xxxxxx Xxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxxx,
00000 (the "Company");
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WHEREAS the Seller, as sole shareholder of the Company, for the purpose
of inducing Buyer to enter into this Agreement, agrees to make certain
representations and covenants concerning the Company and the Subject Shares;
WHEREAS this Agreement contemplates a transaction in which the Buyer
will purchase from the Seller, and the Seller will sell to the Buyer, the
Subject Shares for the purchase consideration consisting of cash and Buyer's
common shares;
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1 Definitions.
1.1 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
1.2 "Buyer" has the meaning set forth in the preface above.
1.3 "Closing" has the meaning set forth in Section 2.5 below.
1.4 "Closing Date" has the meaning set forth in Section 2.5 below.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "Company" has the meaning set forth in the preface above.
1.7 "Confidential Information" means any information concerning
the businesses and affairs of the Company or the Buyer that is not already
generally available to the public.
1.8 "Disclosure Schedule" has the meaning set forth in Section 4
below.
1.9 "Earn-Out Period" has the meaning set forth in Section 2.3
below.
1.10 "Earn-Out Shares" has the meaning set forth in Section 2.3
below.
1.11 "EBITDA" has the meaning set forth in Section 2.3 below.
1.12 "Environmental, Health, and Safety Requirements" shall mean
all federal, state, local and foreign statutes, regulations, ordinances and
other provisions having the force or effect of law, all judicial and
administrative orders and determinations, all contractual obligations and all
common law concerning public health and safety, worker health and safety, and
pollution or protection of the environment, including without limitation all
those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes, chemical substances or mixtures,
pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise or radiation, each as
amended and as now or hereafter in effect.
1.13 "Financial Statements" has the meaning set forth in Section
4.6 below.
1.14 "GAAP" means United States generally accepted accounting
principles as in effect from time to time.
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1.15 "Indemnified Party" has the meaning set forth in Section 8.2
below.
1.16 "Indemnifying Party" has the meaning set forth in Section 8.2
below.
1.17 "Intellectual Property" means (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations,
continuations-in-part, revisions, extensions, and reexaminations thereof, (ii)
all trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (iii) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (iv) all mask works and all applications,
registrations, and renewals in connection therewith, (v) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (vi) all computer software (including data and related
documentation), (vii) all other proprietary rights, and (viii) all copies and
tangible embodiments thereof (in whatever form or medium).
1.18 "Knowledge" means actual knowledge after reasonable
investigation.
1.19 "Liability" means any liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.20 "Most Recent Fiscal Year End" has the meaning set forth in
Section 4.6 below.
1.21 "Most Recent Fiscal Period End" has the meaning set forth in
Section 4.6 below
1.22 "Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice (including with respect to
quantity and frequency).
1.23 "Party" has the meaning set forth in the preface above.
1.24 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
1.25 "Purchase Consideration" has the meaning set forth in Section
2.2 below.
1.26 "Purchase Shares" has the meaning set forth in Section 2.2
below.
1.27 "Securities Act" means the Securities Act of 1933, as amended.
1.28 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (i) mechanic's,
materialmen's, and similar liens, (ii) liens for Taxes not yet due and payable
[or for Taxes that the taxpayer is contesting in good faith through appropriate
proceedings], (iii) purchase money liens and liens securing rental payments
under capital lease arrangements, and (iv) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.
1.29 "Seller" has the meaning set forth in the preface above.
1.30 "Subject Shares" means all of the outstanding capital stock of
the Company.
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1.31 "Subscription and Registration Rights Agreement" or "Subscription
Agreement" has the meaning set forth in Section 2.2 below and means the
subscription and registration rights agreement & stockholder's certificate
annexed hereto as Exhibit A to be entered into between the Seller and Buyer.
1.32 "Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
1.33 "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
1.34 "Third Party Claim" has the meaning set forth in Section 8.2
below.
2 Purchase and Sale of the Subject Shares.
2.1 Basic Transaction. Section 4.2 of the Disclosure Schedule sets
forth the number of Subject Shares owned by the Seller. At the Closing, on and
subject to the terms and conditions of this Agreement, the Seller will transfer,
convey and deliver to the Buyer all of his right, title and interest in and to
all of the Subject Shares for the consideration specified in this Section 2.
2.2 Purchase Consideration. As consideration for the Subject Shares,
the Buyer shall deliver to the Seller the Purchase Consideration, which shall
consist of (i) U.S.$1,400,000 in cash (the "Cash Payment") and (ii) 675,000
shares of Buyer's common shares (the "Purchase Shares"), the issuance of such
shares to be effected according to the terms of a separate Subscription and
Registration Rights Agreement (the "Subscription Agreement") between the Seller
and the Buyer. The Purchase Consideration shall be paid as provided below in
this Section 2.2. At the Closing, and subject to the terms set forth in the
Subscription Agreement, the Buyer shall deliver the Cash Payment. Subject to the
terms set forth in the Subscription Agreement, the Buyer shall deliver the
Purchase Shares to the Seller on January 1, 2001.
2.2.1 Section 338 Election. In the event the Buyer makes an
election under Code Section 338 as set forth in Section 8.1 of this Agreement,
the Buyer agrees to pay interest ("Interest") on the portion of the Tax payment
accelerated and paid by the Seller as a direct result of such election by the
Buyer. The rate of Interest shall equal the prime rate, as set forth in The Wall
Street Journal or similar publication, plus 2%. The Interest shall be payable on
a quarterly basis commencing after such accelerated Tax payment is paid by the
Seller and shall cover the period from the date the accelerated Tax payment is
paid to the date the accelerated Tax payment would have been due if no election
under Section 338 was made. Section 2.2.1 of the Disclosure Schedule sets forth
the estimated accelerated Tax payment and the corresponding estimated Interest
payable by the Buyer under this Agreement.
2.2.2 Tax on Purchase Price Allocation. The Buyer shall pay to
Seller at the Closing an amount set forth in Schedule 2.2.2 attached hereto for
certain Tax incurred by the Seller as a result of certain Purchase Price
allocations made by the Buyer.
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2.3 Additional Consideration. Subject to the terms of the Subscription
Agreement, as additional consideration, Buyer shall pay to Seller up to a
maximum of 350,000 common shares (the "Earn-Out Shares") of the Buyer, to which
the Seller may be become entitled, based upon the Company's audited earnings
before income taxes, depreciation and amortization, excluding inter-company
administration and management charges ("EBITDA") for the three year period
commencing December 1, 1998 (the "Earn-Out Period"). Earn-Out Shares earned in
the years commencing December 1, 1998 and 1999 will be paid to Seller on March
15, 2001 and Earn-Out Shares earned in the year commencing December 1, 2000,
will be paid to Seller on March 15, 2002. The number of Earn-Out Shares to be
paid to Seller, if any, will be based upon the following:
(i) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1,1998 ("1998 EBITDA") in excess of
U.S.$700,000, Seller will receive one Earn-Out Share;
(ii) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1, 1999 ("1999 EBITDA") in excess of
U.S.$800,000 or 1998 EBITDA, whichever is greater, Seller will
receive one Earn-Out Share;
(iii) For each U.S.$5.00 of Company EBITDA for the fiscal year
commencing December 1, 2000 in excess of U.S. $900,000, 1998
EBITDA or 1999 EBITDA, whichever is greater, Seller will
receive one Earn-Out Share;
(iv) In the event that during the Earn-Out Period, the Company,
with the consent of the Buyer, acquires or merges with another
business (the "Target"), the Company's EBITDA may be adjusted
for the purposes of determining the amount of Earn-Out Shares
earned by the Seller. Accordingly:
(x) if Target's EBITDA for the fiscal year immediately
preceding the merger or acquisition ("Target's
Initial EBITDA") is exceeded in Target's fiscal
year subsequent to the acquisition or merger (the
"Target's First Excess EBITDA"), then Target's
First Excess EBITDA will be credited to Company's
EBITDA for the year in which it is earned;
(y) if Target's Initial EBITDA plus Target's First
Excess EBITDA is exceeded in Target's second fiscal
year subsequent to the acquisition or merger (the
"Target's Second Excess EBITDA"), then Target's
Second Excess EBITDA will be credited to Company's
EBITDA for the year in which it is earned; and
(z) if Target's Initial EBITDA plus Target's First
Excess EBITDA plus Target's Second Excess EBITDA is
exceeded in Target's third fiscal year subsequent
to the acquisition or merger (the "Target's Third
Excess EBITDA") the Target's Third Excess EBITDA
will be credited to
Company's EBITDA for the year in which it is
earned.
For the purpose of calculating the additional Earn-Out Shares
the Seller may be entitled to in connection with any Target
Acquisition, all calculations under this Section 2.3(iv) shall
reflect Target's fiscal year as commencing December 1st during
the Earn-Out Period.
(v) For the sole purpose of clarity and illustration, Schedule 2.3
attached hereto set forth, based upon certain assumptions, the
applications under this Section 2.3.
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2.4 Acceleration of Delivery of Shares. Notwithstanding the dates set
forth above for the delivery of the Purchase Shares and the Earn-Out Shares:
(i) In the event Xxxxxx Xxxx ceases to be Chief Executive Officer
of the Buyer prior to January 1, 2001 (a "Xxxx Event"), then,
at Seller's option, Seller will receive 33 1/3% of the
Purchase Shares on January 1st of the succeeding calendar year
in which the Xxxx Event occurred, and 33 1/3% of the Purchase
Shares on January 1st of each calendar year thereafter or
until January 1, 2001, when all Purchase Shares will be
received by Seller;
(ii) If prior to the end of Earn-Out Period, Buyer were to be
acquired or merged (the "Acquisition") with another entity in
which Acquisition Buyer would not be the surviving entity,
then Seller, upon the closing of the Acquisition (the
"Acquisition Closing"), will receive all Purchase Shares not
theretofore delivered and a number of Earn-Out Shares, subject
to the limitations set forth in Section 2.3 above, determined
by multiplying (i) the number of Earn-Out Shares theretofore
earned prior to the Acquisition Closing, by (ii) the average
of the bid and asked closing prices of Buyer's Common Shares,
as reported on the Nasdaq SmallCap Market, or any other
exchange or reporting system on which the Buyer's Common
Shares may be quoted (the "Nasdaq Price"), for the thirty (30)
trading days prior to the Acquisition Closing, and subtracting
the result from U.S.$1,750,000 (the "Balance") and dividing
the Balance by the Nasdaq Price for the fifteen (15) trading
days prior to the Acquisition Closing;
(iii) Subject to the terms and conditions of Seller's Employment
Agreement attached hereto as Exhibit C, in the event Seller is
terminated without cause from his employment with Buyer during
the Earn-Out Period, then Seller will be entitled to receive
upon termination all Purchase Shares not theretofore delivered
and the remainder of the 350,000 Earn-Out Shares not
previously earned by Seller.
(iv) For the sole purpose of clarity and illustration, Schedule 2.4
attached hereto sets forth, based upon certain assumptions,
the applications under this Section 2.4.
2.5 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxxx Xxxxxx &
Xxxxxx LLP in New York, New York, on March 31, 1999, or upon the satisfaction or
waiver of all conditions to the obligations of the Parties to consummate the
transactions contemplated hereby, commencing at 10:00 A.M. local time (the
"Closing Date").
2.5.1 Termination Fee. In the event the Closing does not occur
prior to 15 business days from the Closing Date as a result of the failure of
the Buyer to satisfy a term or condition under this Agreement, the Buyer shall
pay to Seller a termination fee in the amount of $12,500 within 30 days of the
date of such termination of this Agreement. Immediately after such payment by
the Buyer of the termination fee, this Agreement shall become null and void and
the Parties shall have no further rights and or liabilities under this
Agreement.
2.6 Closing Documents. As of the date hereof, (i) the Seller has
delivered to the Buyer the various certificates, instruments, and documents
referred to in Section 6.1 below, (ii) the Buyer has delivered to the Seller the
various certificates, instruments, and documents referred to in Section 6.2
below, (iii) the Seller has delivered to the Buyer stock certificates
representing all of the Subject Shares, endorsed in blank or accompanied by duly
executed assignment documents, and (iv) the Buyer has delivered to the Seller
the Purchase
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Consideration in accordance with the payment terms set forth in Section 2.2
above.
3 Representations and Warranties Concerning the Transaction.
3.1 Representations and Warranties of the Seller. Seller represents and
warrants to the Buyer that the statements contained in this Section 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.1).
3.1.1 Authorization of Transaction. Seller has full power and
authority to execute and deliver this Agreement and to perform his obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Seller, enforceable in accordance with its terms and conditions. Seller
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
3.1.2 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Seller is subject, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Seller is a party or by which he
or it is bound or to which any of his or its assets is subject.
3.1.3 Brokers' Fees. Seller has no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
3.1.4 Investment. Subject to the Subscription Agreement, the
Seller (i) understands that the Purchase Shares have not been registered under
the Securities Act, or under any state securities laws, and are being offered
and sold in reliance upon federal and state exemptions for transactions not
involving any public offering, (ii) is acquiring the Purchase Shares solely for
its own account for investment purposes, and not with a view to the distribution
thereof, (iii) is a sophisticated investor with knowledge and experience in
business and financial matters, (iv) has received certain information concerning
the Buyer and has had the opportunity to obtain additional information as
desired in order to evaluate the merits and the risks inherent in holding the
Purchase Shares, and (v) is able to bear the economic risk and lack of liquidity
inherent in holding the Purchase Shares.
3.1.5 Subject Shares. The Seller holds of record and owns
beneficially the number of Subject Shares set forth in Section 4.2 of the
Disclosure Schedule, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement). The Seller is not a party to any voting trust, proxy, or
other agreement or understanding with respect to the voting of any capital stock
of the Company.
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3.2 Representations and Warranties of the Buyer. The Buyer represents
and warrants to the Seller that the statements contained in this Section 3.2 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Section
3.2).
3.2.1 Organization of the Buyer. The Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
3.2.2 Authorization of Transaction. The Buyer has full power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions. The Buyer need not give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
3.2.3 Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer is subject or any provision of
its charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
the Buyer is a party or by which it is bound or to which any of its assets is
subject.
3.2.4 Brokers' Fees. The Buyer has no Liability or obligation
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Seller could
become liable or obligated.
3.2.5 Investment. The Buyer is not acquiring the Subject
Shares with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
3.2.6 Subject to the terms and conditions contained in this
Agreement, the Buyer agrees to pay all costs of collection, including reasonable
attorneys' fees, incurred by the Seller as a result of any failure by the Buyer
to deliver the Purchase Consideration and Earn-Out Shares, if any, pursuant to
Section 2.2 and 2.3 set forth above.
3.2.7 Neither the execution and delivery of this Agreement by
the Buyer nor the consummation or performance of any of the transactions
contemplated by this Agreement by the Buyer will give any Person the right to
prevent, delay, or otherwise interfere with any of the contemplated transactions
pursuant to:
3.2.7.1 any provision of Buyer's charter documents
or other organizational documents;
3.2.7.2 any resolution adopted by the board of
directors or the shareholders of Buyer;
3.2.7.3 any legal requirement, judgment or order
to which the Buyer may be bound.
3.2.8 The Buyer is not and will not be required to obtain any
consent from
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any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the contemplated transactions under
this Agreement.
4 Representations and Warranties Concerning the Company. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete in all material respects as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made as of the date of this Agreement), except as set forth in the
disclosure schedule delivered by the Seller to the Buyer on the date hereof and
initialed by the Parties (the "Disclosure Schedule"). Nothing in the Disclosure
Schedule shall be deemed adequate to disclose an exception to a representation
or warranty made herein, however, unless the Disclosure Schedule identifies the
exception with particularity and describes the relevant facts in detail to the
best of the Seller's knowledge. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The Disclosure Schedule will be
arranged in paragraphs corresponding to the lettered and numbered paragraphs
contained in this Section 4.
4.1 Organization, Qualification, and Corporate Power. The Company is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Company has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it, except with respect to all foreign jurisdictions, to the best of
the Seller's knowledge the Company has full corporate power and authority and
all licenses, permits, and authorizations necessary to carry on the businesses
in which it is engaged and to own and use the properties owned and used by it in
such foreign jurisdictions. Section 4.1 of the Disclosure Schedule lists the
directors and officers of the Company. The Seller has delivered to the Buyer
correct and complete copies of the charter and bylaws of the Company (as amended
to date). The minute books (containing the records of meetings of the
stockholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the
Company are correct and complete. The Company is not in default under or in
violation of any provision of its charter or bylaws.
4.2 Capitalization. The entire authorized capital stock of the Company
consists of 5,000 shares of common stock, no par value, of which 100 are issued
and outstanding. All of the issued and outstanding shares of the Company's
common stock have been duly authorized, are validly issued, fully paid, and
nonassessable, and are held of record by the Seller as set forth in Section 4.2
of the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company to
issue, sell, or otherwise cause to become outstanding any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of the Company.
4.3 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction
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of any government, governmental agency, or court to which the Company is subject
or any provision of the charter or bylaws of any of the Company or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which the Company is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Security Interest upon any of its assets). The Company need not give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the Parties to
consummate the transactions contemplated by this Agreement, except with respect
to foreign jurisdictions, to the best of the Seller's knowledge, the Company
need not give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Parties to consummate the transactions contemplated by this Agreement in such
foreign jurisdiction.
4.4 Brokers' Fees. The Company does not have any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
4.5 Title to Assets. The Company has good and marketable title to, or a
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown in the Financial Statements or acquired after the date
thereof, free and clear of all Security Interests, except for properties and
assets disposed of in the Ordinary Course of Business since the date of the
Financial Statements.
4.6 Financial Statements. Attached hereto as Exhibit B are (i) the
unaudited balance sheet and statements of income, changes in stockholders'
equity, and cash flow (collectively the "Financial Statements") as of and for
the fiscal year ended December 31, 1995 and (ii) the audited Financial
Statements for the fiscal year ended, December 31, 1996, and December 31, 1997
(the "Most Recent Fiscal Year End") for the Company and the unaudited Financial
Statements for the fiscal year ended December 31, 1998 (the "Most Recent Fiscal
Period End") for the Company. The Financial Statements (including the notes that
may be required by GAAP) have been prepared in accordance with GAAP (except the
Financial Statements for the Most Recent Fiscal Period do not contain notes
thereto) applied on a consistent basis throughout the period covered thereby,
present fairly the financial condition and the results of operations of the
Company as of such periods, are correct and complete, and are consistent with
the books and records of the Company (which books and records are correct and
complete), subject, in the case of the Financial Statements for the Most Recent
Fiscal Period, to normal recurring year-end adjustments consistent with the
Company's past practices.
4.7 Events Subsequent to Most Recent Fiscal Year End. Except as set
forth in Section 4.7 of the Disclosure Schedule, since the Most Recent Fiscal
Year End, there has not been any material adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the Company. Without limiting the generality of the foregoing, since that date:
4.7.1 the Company has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business except as to the Accumulated
Adjustments Account distributions the Company will make to Seller prior to
Closing in the amounts set forth in Section 4.7.1 of the Disclosure Schedule;
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4.7.2 the Company has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases,
and licenses) outside the Ordinary Course of Business;
4.7.3 no party (including the Company) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) outside the
Ordinary Course of Business to which the Company is a party or by which it is
bound;
4.7.4 the Company has not imposed any Security Interest upon
any of its assets, tangible or intangible;
4.7.5 the Company has not made any capital expenditure (or
series of related capital expenditures) outside the Ordinary Course of Business;
4.7.6 the Company has not made any capital investment in, any
loan to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) outside the
Ordinary Course of Business;
4.7.7 the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation outside the Ordinary Course of
Business;
4.7.8 the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of Business;
4.7.9 the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) outside the
Ordinary Course of Business except that the Company will forgive certain loans
by the Company prior to Closing in the amount as set forth in Section 4.7.9 of
the Disclosure Schedule;
4.7.10 the Company has not granted any license or sublicense
of any rights under or with respect to any Intellectual Property;
4.7.11 there has been no change made or authorized in the
charter or Bylaws of the Company;
4.7.12 the Company has not issued, sold, or otherwise disposed
of any of its capital stock, or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
4.7.13 the Company has not declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
4.7.14 the Company has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property
outside the Ordinary Course of Business.;
4.7.15 the Company has not made any loan to, or entered into
any other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
4.7.16 the Company has not entered into any employment
contract or collective bargaining agreement, written or oral, or materially
modified the terms of any existing such contract or agreement;
13
4.7.17 the Company has not granted any increase in the base
compensation of the Seller or any of its directors, officers, and employees
outside the Ordinary Course of Business except as set forth in Section 4.7.17 of
the Disclosure Schedule;
4.7.18 the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan);
4.7.19 the Company has not made any other change in employment
terms for any of its directors, officers, and employees outside the Ordinary
Course of Business;
4.7.20 the Company has not made or pledged to make any
charitable or other capital contribution outside the Ordinary Course of
Business; and
4.7.21 there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company.
4.8 Undisclosed Liabilities. The Company does not have any Liability
(and there is no present basis for any present and future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability and to the best of Seller's knowledge,
there is no basis for future action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand against any of them giving rise to any
Liability), except for (i) Liabilities set forth on the face of the Financial
Statements (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Year End in the Ordinary Course of Business
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law).
4.9 Legal Compliance. To the best of the Seller's knowledge, each of
the Company, and its predecessors and affiliates has complied with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to
comply.
4.10 Tax Matters.
4.10.1 The Company has filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all
respects. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been paid. The Company is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns that it
is or may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of the Company that arose in connection with any
failure (or alleged failure) to pay any Tax.
4.10.2 The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
4.10.3 Neither the Seller nor any director or officer (or
employee responsible
14
for Tax matters) of the Company expects any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Company either (i) claimed or
raised by any authority in writing or (ii) as to which any of the Seller and the
directors and officers (and employees responsible for Tax matters) of the
Company has Knowledge based upon personal contact with any agent of such
authority. Section 4.10 of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after October 31, 1993, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit. The Seller has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports, and statements of
deficiencies assessed against or agreed to by the Company since October 31,
1993.
4.10.4 The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
4.10.5 The Company has not filed a consent under Code Section
341(f) concerning collapsible corporations. The Company has not made any
payments, is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Code Section 280G. The Company has not been a United States
real property holding corporation within the meaning of Code Section 897(c)(2)
during the applicable period specified in Code Section 897(c)(1)(A)(ii). The
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. The Company is not a party to any
Tax allocation or sharing agreement. The Company (i) has not been a member of an
Affiliated Group (within the meaning of Code Section 1504(a) or similar
provision of state, local or foreign law) filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company) or
(ii) does not have any Liability for the Taxes of any Person (other than the
Company ) under Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor, by contract, or otherwise.
4.10.6 Section 4.10 of the Disclosure Schedule sets forth the
following information with respect to the Company as of the most recent
practicable date: (i) the basis of the Company in its assets; and (ii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Company.
4.10.7 The unpaid Taxes of the Company (i) did not, as of the
Most Recent Fiscal Year End, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Financial Statements (rather
than in any notes thereto) and (ii) do not exceed that reserve as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company in filing its Tax Returns.
4.10.8 The Company, and any predecessor of the Company, has
been a validly electing S corporation within the meaning of Code Sections 1361
and 1362 at all times during its existence and the Company will be an S
corporation up to and including the Closing Date.
4.10.9 The Tax Disclosure Schedule identifies each Company
Subsidiary that is a "qualified subchapter S subsidiary" within the meaning of
Code Section 1361(b)(3)(B).
15
Each Subsidiary so identified has been a qualified subchapter S subsidiary at
all time since the date shown on such schedule up to and including the Closing
Date.
4.10.10 The Company will not be liable for any Tax under Code
Section 1374 in connection with the deemed sale of the Company's assets
(including the assets of any qualified subchapter S subsidiary) caused by the
Section 338(h)(10) Election. Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (A) acquired assets from
another corporation in a transaction in which the Company's Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis of the acquired assets (or any other property) in the hands of the
transferor or (B) acquired the stock of any corporation which is a qualified
subchapter S subsidiary.
4.11 Intellectual Property.
4.11.1 The Company owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property, free
and clear of any Security Interest or other restriction, necessary or desirable
for the operation of the business of the Company as presently conducted. Each
item of Intellectual Property owned or used by the Company immediately prior to
the Closing hereunder will be owned or available for use by the Company on
identical terms and conditions immediately subsequent to the Closing hereunder.
The Company has taken all necessary and desirable action to maintain and protect
each item of Intellectual Property that it owns or uses.
4.11.2 The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Seller and the directors and officers
(and employees with responsibility for Intellectual Property matters) of the
Company has ever received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or violation
(including any claim that the Company must license or refrain from using any
Intellectual Property rights of any third party). To the Knowledge of any of the
Seller and the directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
4.11.3 Section 4.11 of the Disclosure Schedule (i) lists all
of the trademarks, unregistered trademarks, service marks, trade dress, logos,
trade names, and corporate names used in the Company's business, together with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (ii) identifies each
license, agreement, or other permission which the Company has granted to any
third party with respect to any of its Intellectual Property; and (iii)
identifies each item of Intellectual Property that any third party owns and that
the Company uses pursuant to license, sublicense, agreement, or permission.
4.12 Tangible Assets. The Company owns or leases all buildings,
machinery, equipment, and other tangible assets required for the conduct of its
business as presently conducted. Each such tangible asset, except for used
equipment held for resale, is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the
purposes for which it presently is used.
4.13 Inventory. The inventory of the Company consists of used
equipment, raw materials and supplies, manufactured and purchased parts, goods
in process, and finished
16
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write down set forth on
the face of the Financial Statements (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. Section 4.13 of the Disclosure Schedule
lists and describes the condition of the inventory of the Company as of the Most
Recent Fiscal Period End. At Closing, there is no change in the inventory of the
Company set forth in Section 4.13 of the Disclosure Schedule other than changes
in the Ordinary Course of Business.
4.14 Contracts. Section 4.14 of the Disclosure Schedule lists the
following contracts and other agreements to which the Company is a party:
4.14.1 any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
4.14.2 any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a material
loss to the Company, or involve consideration in excess of $25,000;
4.14.3 any agreement concerning a partnership or joint
venture;
4.14.4 any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of $25,000 or
under which it has imposed a Security Interest on any of its assets, tangible or
intangible;
4.14.5 any agreement concerning confidentiality or
noncompetition;
4.14.6 any agreement with any of the Seller or its affiliates
(other than the Company);
4.14.7 any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
4.14.8 any collective bargaining agreement;
4.14.9 any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $25,000 or providing severance benefits;
4.14.10 any agreement under which it has advanced or loaned
any amount to any of its directors, officers, and employees;
4.14.11 any agreement under which the consequences of a
default or termination could reasonably likely have a material adverse effect on
the business, financial condition, operations, results of operations, or future
prospects of the Company; or
4.14.12 any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $25,000.
17
The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in Section 4.14 of the Disclosure Schedule (as amended
to date) and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 4.14 of the Disclosure Schedule. With
respect to each such agreement: (i) to the best of the Seller's knowledge, the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(ii) the agreement will continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (iii) to the best of the Seller's knowledge,
no party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (iv) no party has
repudiated any provision of the agreement.
4.15 Notes and Accounts Receivable. All notes and accounts receivable
of the Company are reflected properly on its books and records, are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Financial
Statements (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company.
4.16 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
4.17 Insurance. Section 4.17 of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past
five years:
4.17.1 the name, address, and telephone number of the agent;
4.17.2 the name of the insurer, the name of the
policyholder, and the name of each covered insured;
4.17.3 the policy number and the period of coverage;
4.17.4 the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and operate) of
coverage; and
4.17.5 a description of any retroactive premium adjustments
or other loss-sharing arrangements.
To the best of the Seller's knowledge, with respect to each such insurance
policy: (i) the policy is legal, valid, binding, enforceable, and in full force
and effect; (ii) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby; (iii) neither the Company
nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination, modification, or acceleration, under the
policy; and (iv) no party to the policy has repudiated any provision thereof.
The Company has been covered during the past five years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period.
18
Section 4.17 of the Disclosure Schedule describes any self-insurance
arrangements affecting the Company.
4.18 Litigation. Section 4.18 of the Disclosure Schedule sets forth
each instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Section 4.18 of the Disclosure Schedule could result in any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of the Company. None of the Seller and the directors and
officers (and employees with responsibility for litigation matters) of the
Company has any reason to believe that any such action, suit, proceeding,
hearing, or investigation may be brought or threatened against the Company.
4.19 Product Warranty. To the best of the Seller's knowledge, each
product manufactured, sold, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company has no Liability (and there is no basis for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against the Company giving rise to any Liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Financial Statements (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company. No product manufactured, sold, leased, or delivered by
the Company is subject to any guaranty, warranty, or other indemnity beyond the
applicable standard terms and conditions of sale or lease. Section 4.19 of the
Disclosure Schedule sets forth the standard terms and conditions of sale or
lease of the Company (containing applicable guaranty, warranty, and indemnity
provisions).
4.20 Product Liability. To the best of the Seller's knowledge, the
Company does not have any Liability (and there is no basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against the Company giving rise to any Liability) arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Company.
4.21 Employees. To the best of Seller's knowledge, and the directors
and officers (and employees with responsibility for employment matters) of the
Company, no executive, key employee, or group of employees has any plans to
terminate employment with the Company. The Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices, or other collective bargaining
disputes. The Company has not committed any unfair labor practice. None of the
Seller and the directors and officers (and employees with responsibility for
employment matters) of the Company has any Knowledge of any organizational
effort presently being made or threatened by or on behalf of any labor union
with respect to employees of the Company.
4.22 Employee Benefits.
4.22.1 Definitions. For the purpose of this Section 4.22, the
following terms shall have the meanings set forth below:
i. "Employee Benefit Plan" means any (i)
nonqualified deferred compensation or
retirement plan or arrangement, (ii)
qualified
19
defined contribution retirement plan or
arrangement which is an Employee Pension
Benefit Plan, (iii) qualified defined
benefit retirement plan or arrangement which
is an Employee Pension Benefit Plan
(including any Multi employer Plan), or (iv)
Employee Welfare Benefit Plan or material
fringe benefit or other retirement, bonus,
or incentive plan or program.
ii. "Employee Pension Benefit Plan" has the
meaning set forth in ERISA Section 3(2).
iii. "Employee Welfare Benefit Plan" has the
meaning set forth in ERISA Section 3(1).
iv. "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
v. "ERISA Affiliate" means each entity which is
treated as a single employer with Seller for
purposes of Code Section 414.
vi. "Multi employer Plan" has the meaning set
forth in ERISA Section 3(37).
vii. "PBGC" means the Pension Benefit Guaranty
Corporation.
4.22.2 Section 4.22 of the Disclosure Schedule lists each
Employee Benefit Plan that the Company maintains or to which the Company
contributes.
4.22.2.1 Each such Employee Benefit Plan (and each
related trust, insurance contract, or fund) complies in form and in operation in
all respects with the applicable requirements of ERISA and the Code.
4.22.2.2 All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
4.22.2.3 Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan has received a determination letter from the
Internal Revenue Service to the effect that it meets the requirements of Code
Section 401(a).
4.22.2.4 As of the last day of the most recent prior
plan year, the market value of assets under each such Employee Benefit Plan
which is an Employee Pension Benefit Plan (other than any Multi employer Plan)
equaled or exceeded the present value of liabilities thereunder (determined in
accordance with then current funding assumptions).
4.22.2.5 The Seller has delivered to the Buyer
correct and complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report, and all related trust agreements,
insurance contracts, and other funding agreements which implement each such
Employee Benefit Plan.
4.22.3 With respect to each Employee Benefit Plan that the
Company or any ERISA Affiliate maintains or has maintained during the prior six
years or to which any of them contributes, or has been required to contribute
during the prior six years:
4.22.3.1 No action, suit, proceeding, hearing, or
investigation with
20
respect to the administration or the investment of the assets
of any such Employee Benefit Plan (other than routine claims for benefits) is
pending.
4.22.3.2 The Company has not incurred any liability
to the PBGC (other than PBGC premium payments) or otherwise under Title IV of
ERISA (including any withdrawal liability) with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan.
4.23 Guaranties. The Company is not a guarantor and is not otherwise
liable for any Liability or obligation (including indebtedness) of any other
Person.
4.24 Environmental, Health, and Safety Matters.
4.24.1 Each of the Company and its predecessors and affiliates
has complied and is in compliance with all Environmental, Health, and Safety
Requirements.
4.24.2 Without limiting the generality of the foregoing, each
of the Company and its predecessors and affiliates has obtained and complied
with, and is in compliance with, all permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements for
the occupation of its facilities and the operation of its business. Section 4.24
of the Disclosure Schedule lists all such permits, licenses and other
authorizations.
4.24.3 Neither the Company, its predecessors or affiliates,
nor the Seller has received any written or oral notice, report or other
information regarding any actual or alleged violation of Environmental, Health,
and Safety Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to any of them or
its facilities arising under Environmental, Health, and Safety Requirements.
4.25 Certain Business Relationships with the Company. Except as set
forth in Section 4.25 of the Disclosure Schedule, the Seller has not been
involved in any business arrangement or relationship with the Company within the
past 12 months.
4.26 Disclosure. The representations and warranties contained in this
Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5 Post-Closing Covenants. The Parties agree as follows with respect to the
period following the Closing.
5.1 General. In case at any time after the Closing any further action
is necessary or desirable to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as the other Party may request, all
at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Section 6 below). Seller
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company.
5.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
21
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, the other Party will cooperate with
him or it and his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records as
shall be necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 7 below).
5.3 Transition. Seller shall not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing.
5.4 Confidentiality. Seller will treat and hold as such all of the
Confidential Information, refrain from using any of the Confidential Information
except in connection with this Agreement, and deliver promptly to the Buyer or
destroy, at the request and option of the Buyer, all tangible embodiments (and
all copies) of the Confidential Information which are in his possession. In the
event that the Seller requests or is required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller will notify the Buyer promptly of the request or requirement
so that the Buyer may seek an appropriate protective order or waive compliance
with the provisions of this Section 5.4. If, in the absence of a protective
order or the receipt of a waiver hereunder, the Seller is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal or
else stand liable for contempt, Seller may disclose the Confidential Information
to the tribunal; provided, however, that Seller shall use his best efforts to
obtain, at the request of the Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate. The foregoing
provisions shall not apply to any Confidential Information which is generally
available to the public immediately prior to the time of disclosure.
5.5 Covenant Not to Compete. In consideration of $30,000, an amount
which is included in the Purchase Consideration, for a period of five (5) years
from and after the Closing Date, or two (2) years following the termination of
Seller's employment with the Company, whichever period is shorter, the Seller
will not engage directly or indirectly in any business that the Company conducts
as of the Closing Date in any geographic area in which the Company conducts that
business as of the Closing Date; provided, however, that in the event the Seller
owns any common shares of the Buyer or less than 1% of the outstanding stock of
any publicly-traded corporation, the Seller shall not be deemed to engage solely
by reason thereof in any of its businesses. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section 5.5
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
5.6 Purchase Shares and Earn-Out Shares. Subject to the Subscription
Agreement, the certificate or certificates representing the Purchase Shares and
Earn-Out Shares, if any, shall be imprinted with a legend substantially in the
following form:
22
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). SUCH SECURITIES MAY NOT
BE TRANSFERRED, SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED UNLESS
(i) A REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT WITH RESPECT TO
THE SECURITIES OR (ii) THERE IS AN OPINION OF COUNSEL SATISFACTORY TO
THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED OR THAT SUCH TRANSFER
MAY BE MADE PURSUANT TO RULE 144 OR RULE 144A OF THE ACT."
The Seller may not transfer his Purchase Shares and Earn-Out Shares, if any,
until they have first furnished the Buyer with (i) a written opinion
satisfactory to the Buyer in form and substance from counsel satisfactory to the
Buyer by reason of experience to the effect that the Seller may transfer his
Purchase Shares as desired without registration under the Securities Act and
(ii) a written undertaking executed by the desired transferee satisfactory to
the Buyer in form and substance agreeing to be bound by the transfer contained
herein. Transfer of the Purchase Shares by the Seller is further restricted as
provided below.
5.7 Lock-up of Buyer's Common Shares. In the event the directors,
principal shareholders and principal officers of the Buyer, for the purpose of
furthering the business and capital needs of the Buyer, unanimously agree to a
binding "lock-up" of Buyer's common shares owned by them, the Seller shall
accede to and comply with such "lock-up" with respect to Buyer's common shares
(including the Purchase Shares) owned by the Seller.
6 Conditions to Obligation to Close.
6.1 Conditions to Obligation of the Buyer. The obligation of the Buyer
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
6.1.1 the representations and warranties set forth in Section
3.1 and Section 4 above shall be true and correct in all material respects at
and as of the Closing Date;
6.1.2 the Seller shall have performed and complied with all of
his covenants hereunder in all material respects through the Closing;
6.1.3 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of the Buyer
to own the Subject Shares and to control the Company, or (iv) affect adversely
the right of the Company to own its assets and to operate its business (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
6.1.4 the Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions specified above in Section
6.1.1 through 6.1.3 is satisfied in all respects;
6.1.5 the Company shall have received all authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.1.2, Section 3.2.3, and Section 4.3 above;
23
6.1.6 the Seller shall have delivered or caused to be
delivered to the Buyer stock certificates representing the Subject Shares,
endorsed in blank or accompanied by duly executed assignment documents;
6.1.7 the Seller shall have entered into the Subscription and
Registration Rights Agreement & Stockholder's Certificate with the Buyer
substantially in the form set forth in Exhibit A attached hereto and the same
shall be in full force and effect;
6.1.8 Seller shall have entered into an Employment Agreement
with the Buyer substantially in the form set forth in Exhibit C attached hereto
and the same shall be in full force and effect;
6.1.9 the Buyer shall have received from counsel to the Seller
an opinion in form and substance as set forth in Exhibit D attached hereto,
addressed to the Buyer, and dated as of the Closing Date;
6.1.10 the Buyer shall have received the resignations,
effective as of the Closing, of each director and officer of the Company other
than those whom the Buyer shall have specified in writing prior to the Closing;
6.1.11 the Buyer shall have received all corporate books and
records of the Company; and
6.1.12 all actions to be taken by the Seller in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this Section 6.1 if it executes a
writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him in connection with
the Closing is subject to satisfaction of the following conditions:
6.2.1 the representations and warranties set forth in Section
3.2 above shall be true and correct in all material respects at and as of the
Closing Date;
6.2.2 the Buyer shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
6.2.3 no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement
or (ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
6.2.4 the Buyer shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above in Section
6.2.1 through 6.2.3 is satisfied in all respects;
6.2.5 Each Selling Shareholder shall have entered into the
Subscription and Registration Rights Agreement and Stockholder's Certificate
with the Buyer substantially in the
24
form set forth in Exhibit A attached hereto and the same shall be in full force
and effect;
6.2.6 Seller shall have entered into an Employment Agreement
with the Buyer substantially in the form set forth in Exhibit C attached hereto
and the same shall be in full force and effect;
6.2.7 the Seller shall have received from counsel to the Buyer
an opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to the Seller, and dated as of the Closing Date;
6.2.8 all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to the
Seller;
6.2.9 the Buyer shall have received all authorizations,
consents, and approvals of governments and governmental agencies referred to in
Section 3.2.3 above; and
6.2.10 the Buyer shall have delivered to Seller the Purchase
Consideration.
The Seller may waive any condition specified in this Section 6.2 if he executes
a writing so stating at or prior to the Closing.
7 Remedies for Breaches of This Agreement.
7.1 Indemnification Provisions. In the event either Party breaches (or
in the event any third party alleges facts that, if true, would mean such Party
has breached) any of its representations, warranties, and covenants contained
herein, and provided that a claiming Party makes a written claim within a
reasonable time for indemnification against the breaching Party pursuant to
Section 9.7 below, then the breaching Party agrees to indemnify the claiming
Party from and against the entirety of any Adverse Consequences the claiming
Party may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach). All of the representations and warranties by the
Seller contained in Section 4 (excluding Section 4.10) above shall survive the
Closing hereunder (even if the Buyer knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of three years thereafter. All of the other
representations and warranties of the Parties contained in this Agreement
(including the representations and warranties of Seller contained in Section
4.10 above) shall survive the Closing (even if the damaged Party knew or had
reason to know of any misrepresentation or breach of warranty at the time of
Closing) and continue in full force and effect forever thereafter subject to any
applicable statutes of limitations; provided, however, that the Sellers shall
not have any obligation to indemnify the Buyer from and against any Adverse
Consequences resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or alleged breach) of any representation or warranty of
the Sellers contained in Section 4 (excluding Section 4.10) above until the
Buyer has suffered Adverse Consequences by reason of all such breaches (or
alleged breaches) in excess of a $50,000 aggregate threshold, and only to the
extent of such excess, after taking into account any income tax benefits
realizable by Buyer or it successors or survivors on account of such breach and
directly attributable thereto at which point the Sellers will be obligated to
indemnify the Buyer from and against all such Adverse Consequences. The
liability of Seller under this indemnity (except with respect to claims based on
products liability arising during periods of time in which Seller is or was not
the beneficiary of a products liability
25
insurance policy) shall not exceed the total value of the Purchase
Consideration, as defined in Section 2.2 above, as of the closing, together with
all cumulated or paid dividends thereon. Notwithstanding anything contrary
contained in this Section 7.1, Buyer shall not be entitled to make any claim
under the provisions of this Section 7.1 in respect of Adverse Consequences
accruing or incurred in the ordinary course of business of the Company
subsequent to the Closing Date. Notwithstanding the foregoing, neither Party
shall be required to indemnify the other with respect to any breach of warranty,
representation, agreement or covenant contained herein or in the attached
documents unless the Party seeking indemnification (the "Indemnitee") shall,
with reasonable promptness, provide the Party (the "Indemnitor") with copies of
any claims or other documents received and shall otherwise make available to the
Indemnitor all relevant information material to the defense of any claim against
the Indemnitee which shall serve as the basis for a claim by the Indemnitee
pursuant to the terms hereof. The Indemnitor shall have the election to join in
the defense of any such claim and the Indemnitee shall not settle or compromise
any such claim unless it shall have first obtained the written consent of the
Indemnitor or unless suit shall have been instituted against the Indemnitee and
the Indemnitor shall have failed, after the lapse of a reasonable time after
written notice to the Indemnitor of such suit, to take action to defend the
same; provided however, that the Indemnitee's failure to give prompt notice or
to provide copies of documents or to furnish relevant data shall not constitute
a defense (in whole or in part) to any claim by the Indemnitee unless such
failure causes a material prejudice to the Indemnitor.
7.2 Matters Involving Third Parties.
7.2.1 If any third party shall notify either Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against the other Party (the
"Indemnifying Party") under this Section 7, then the Indemnified Party shall
promptly notify the Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
7.2.2 An Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (i) the Indemnifying
Party notifies the Indemnified Party in writing within fifteen days after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, (ii) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third Party Claim
and fulfill its indemnification obligations hereunder, (iii) such equitable
relief sought by the Third Party Claim, if any, would not, if granted, result in
a material adverse effect on the Indemnified Party's business, and (iv) the
Indemnifying Party conducts the defense of the Third Party Claim actively and
diligently.
7.2.3 So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 7.2.2 above, (i) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (ii) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
26
Indemnifying Party (not to be withheld unreasonably), and (iii) the Indemnifying
Party will not consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written consent of the
Indemnified Party (not to be withheld unreasonably).
7.2.4 In the event any of the conditions in Section 7.2.2
above is or becomes unsatisfied, however, (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not obtain the consent of the
Indemnifying Party in connection therewith), (ii) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
and expenses), and (iii) the Indemnifying Party will remain responsible for any
Adverse Consequences the Indemnified Party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Section 7.
7.3 Character of Indemnification Payments. All indemnification payments
under this Section 7 shall be deemed adjustments to the Purchase Consideration.
7.4 Other Indemnification Provisions. The foregoing indemnification
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy (including without limitation any such remedy
arising under Environmental, Health, and Safety Requirements) either Party may
have with respect to the Company or the transactions contemplated by this
Agreement. The Seller hereby agrees that it will not make any claim for
indemnification against the Company by reason of the fact that he or it was a
director, officer, employee, or agent of the Company or was serving at the
request of the Company as a partner, trustee, director, officer, employee, or
agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against such Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
8 Certain Tax Matters.
8.1 Section 338 Election. At the Buyer's option, the Company and the
Seller will join with Buyer in making an election under Code Section 338 of the
Code (and any corresponding election under state, local, and foreign tax law)
with respect to the purchase and sale of the stock of the Company hereunder (a
"Section 338 Election"). Seller will include any income, gain, loss, deduction,
or other tax items resulting from the Section 338 Election on his Tax Returns to
the extent permitted by applicable law. Seller shall also pay any Tax imposed on
the Company or its Subsidiaries attributable to the making of the Section 338
Election, including, but not limited to, (i) any Tax imposed under Code Section
1374, (ii) any tax imposed under Reg. Section 1.338(h)(10)-1(e)(5), or (iii) any
state, local or foreign Tax imposed on the Company's or its Subsidiaries' gain,
and Seller shall indemnify Buyer, the Company and its Subsidiaries against any
Adverse Consequences arising out of any failure to pay any such Taxes.
8.2 Allocation of Purchase Price. Buyer, the Company and Sellers agree
that the Purchase Price and the liabilities of the company and its qualified
subchapter S subsidiaries (plus other relevant items) will be allocated to the
assets of the Company and its qualified
27
subchapter S subsidiaries for all purposes (including Tax and financial
accounting) as shown on the Allocation Schedule attached hereto. Buyer, the
Company, the Company's Subsidiaries, and Seller will file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
8.3 S Corporation Status. The Company and Seller will not revoke the
Company's election to be taxed as an S corporation within the meaning of Code
Sections 1361 and 1362. The Company and Seller will not take or allow any action
other than the sale of the Company's stock pursuant to this agreement that would
result in the termination of Target's status as a validly electing S corporation
within the meaning of Code Sections 1361 and 1362.
8.4 Tax Periods Ending on or before the Closing Date. Buyer shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit Seller
to review and comment on each Tax Return described in the preceding sentence
prior to filing.
8.5 Cooperation on Tax Matters.
8.5.1 Buyer, the Company and its Subsidiaries and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. The Company and its Subsidiaries and Seller agree
(i) to retain all books and records with respect to Tax matters pertinent to the
Company and its Subsidiaries relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the
extent notified by Buyer or Seller, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements entered into
with any taxing authority, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so request, the Company and its Subsidiaries or
Seller, as the case may be, shall allow the other party to take possession of
such books and records.
8.5.2 Buyer and Seller further agree, upon request, to use
their best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed including, but not limited to,
with respect to the transactions contemplated hereby.
8.6 Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
8.7 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees including any penalties and interest
incurred in connection with this Agreement including any corporate-level gains
tax triggered by the sale of the Company stock, Connecticut Transfer Tax and any
similar tax imposed in other states or subdivisions, shall be paid by the Seller
when due, and Seller will, at his own expense, fill all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and cause
28
its affiliates to, join in the execution of any such Tax Returns and other
documentation.
9 Miscellaneous.
9.1 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that the Buyer may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the Buyer will use its reasonable best
efforts to advise the Seller prior to making the disclosure).
9.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
9.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
9.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the other Party; provided, however, that the Buyer may (i) assign
any or all of its rights and interests hereunder to one or more of its
affiliates and (ii) designate one or more of its affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
9.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
9.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.7 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Seller: Copies to:
Xxxx X'Xxxxxx, President Xxxxxxxxx X. Xxxxx, Esq.
c/o Eastern Equipment Brokers, Inc. Xxxxxx & Samor, P.C.
00 Xxxxxx Xxxxx Xxxxxx 0000 Xxxx Xxxx, X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxxxxx, 00000 Xxxxxxxxx, Xxxxxxxxxxx 00000
Telephone (000) 000-0000 Telephone (000) 000-0000
29
If to the Buyer: Copy to:
Xxxxxx Xxxx, President Xxxxxxx Xxxxxxxxx, Esq.
Officeland Inc. Xxxxxxxxx Xxxxxx & Xxxxxx LLP
000 Xxxxxxxx Xxxxx 00 Xxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 Xxx Xxxx, XX 00000
Telephone (000) 000-0000 Telephone (000) 000-0000
Either Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Either
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule. The Parties agree to the
exclusive jurisdiction of the courts of (i) New York or the United States
District Court for the Southern District of New York in the event an action is
commenced hereunder by the Seller ; or (ii) Connecticut or any United States
District Court sitting in Connecticut in the event an action is commenced
hereunder by Buyer. Each of the Parties hereto agrees that process may be served
upon them in any manner authorized by the laws of the jurisdiction determined in
accordance with the previous sentence and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
9.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Party to be charged. No waiver by either Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
9.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
9.11 Expenses. Each of the Parties and the Company will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
Notwithstanding the foregoing, the Seller hereby assumes and agrees to reimburse
the Company within five days of the Closing Date for (i) all sums in excess of
$45,000 paid by the Company prior to the Closing for legal fees and expenses and
(ii) all sums in excess of $45,000 paid by the Company prior to the Closing for
accounting fees and expenses. The Seller agrees that the Company has not borne
and will not bear any of the Seller's costs and
30
expenses (including any of his legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
9.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If either Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
9.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
9.14 Specific Performance. Seller acknowledges and agrees that the
Buyer would be damaged irreparably in the event Seller breaches his covenant not
to compete set forth in Section 5.5 above and in his Employment Agreement.
Accordingly, Seller agrees that the Buyer shall be entitled to an injunction or
injunctions to prevent breaches of said covenant not to compete and to enforce
specifically said covenant not to compete in any action instituted in any state
or federal court sitting in the State of Connecticut.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
made effective as of January 1, 1999.
Officeland Inc.
By: /s/ Xxxxxx Xxxx /s/ Xxxx X'Xxxxxx
----------------------- -----------------
Xxxxxx Xxxx, President Xxxx X'Xxxxxx
31
