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EXHIBIT 2.20
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of April 23, 1998, by
and among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE
CENTRE FORT WORTH, INC., a Texas corporation to be formed as a wholly-owned
subsidiary of Buyer ("Acquisition"), METRO DATA SUPPLY, INC., a Texas
corporation ("Company"), XXXXX XXXX, an individual residing in Texas and XXXX
XXXX, an individual residing in Texas (each a "Seller" or "Shareholder" and
collectively the "Sellers" or "Shareholders").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Sellers wish to set
forth the terms and conditions upon which a merger of the Company with and into
Acquisition will occur and provide for the representations, warranties,
agreements, and conditions applicable to the transactions contemplated by this
Agreement;
WHEREAS, the Board of Directors of each of Buyer, Acquisition and the
Company deems the merger advisable and in the best interests of each of Buyer,
Acquisition and the Company and of their respective shareholders;
WHEREAS, the shareholders of Acquisition and the Company have approved
this Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code").
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract except for this Agreement (a)
under which the Company has or may acquire any rights, (b) under which the
Company has or may become subject to any obligation or liability, or (c) by
which the Company or any of the assets owned, leased or used by it is or may
become bound.
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"BALANCE SHEET"--as defined in Section 3.4.
"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances in an effort to obtain
that such result is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, and
the term "Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or circumstance.
"BUYER"--as defined in the first paragraph of this Agreement.
"CLOSING"--as defined in Section 2.6.
"CLOSING DATE"--the date and time as of which the Closing
actually takes place.
"COMPANY"--as defined in the Recitals of this Agreement.
"CONSENT"--any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS"--all of the transactions contemplated
by this Agreement, including:
(a) the merger of the Company with and into Acquisition;
(b) the execution, delivery, and performance of the Employment
Agreement;
(c) the performance by Buyer, Acquisition, the Company and
Sellers of their respective covenants and obligations under this Agreement;
(d) delivery of the Purchase Price Consideration; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
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"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Sellers
and the Company to Buyer concurrently with the execution and delivery of this
Agreement, a copy of which is attached hereto and incorporated herein for all
purposes.
"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
"ENCUMBRANCE"--any charge, claim, lien, option, pledge, security
interest, right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or exercise of any
other attribute of ownership excepting out those liens for taxes not yet due
and payable and automatic statutory and constitutional liens.
"ENVIRONMENT"--soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water supply, stream sediments,
ambient air (including indoor air), plant and animal life, and any other
environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"-- any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other
remediation or response actions ("Cleanup") required by applicable
Environmental Law or Occupational Safety and Health Law and for any natural
resource damages; or
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(d) any other compliance, corrective, investigative, or remedial
measures required under Environmental Law or Occupational Safety and Health
Law.
The terms "removal," "remedial," and "response action," include
the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW"--any Legal Requirement that requires or
relates to:
(a) advising or notifying of appropriate authorities and
employees of releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the commencements
of activities, such as resource extraction or construction, that could have
significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
harmful substances;
(e) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"FACILITIES"--any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the
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authority of any Governmental Body or pursuant to any Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY"--the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use of Hazardous
Materials in, on, under, about, or from the Facilities or any part thereof into
the Environment and any other act or thing that increases the danger, or risk
of danger, or poses an unreasonable risk of harm to persons or property on or
off the Facilities, or that may affect the value of the Facilities or the
Company.
"INTERIM BALANCE SHEET"--as defined in Section 3.4.
"HAZARDOUS MATERIALS"--any waste or other substance that is
listed, defined, designated, classified or regulated as, or otherwise
determined to be, hazardous, radioactive, or toxic or a pollutant or a
contaminant under or pursuant to any Environmental Law, including any admixture
or solution thereof, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"IRC"--the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS"--the United States Internal Revenue Service or any
successor agency, and, to the extent relevant, the United States Department of
the Treasury.
"KNOWLEDGE"--an individual will be deemed to have "Knowledge" of
a particular fact or other matter if (a) such
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individual is actually aware of such fact or other matter or (b) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the ordinary course of business.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or
other administrative order, constitution, law, ordinance, principle of common
law, regulation, or statute.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide
safe and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator of which
Sellers have knowledge.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person will
be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the
same line of businesses as such Person.
"ORGANIZATIONAL DOCUMENTS"--(a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"PERSON"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
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"PROCEEDING"--any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"RELATED PERSON"--with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly under common control
with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, general
partner, executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) For purposes of this definition, (a) the "Family" of an
individual includes (i) the individual, (ii) the individual's spouse, (iii) any
child of the individual, and (iv) any other natural person who resides with
such individual, and (b) "Material Interest" means direct or indirect
beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or
other equity interests
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representing at least 5% of the outstanding equity securities or equity
interests in a Person.
"RELEASE"--any spilling, leaking, emitting, discharging,
depositing, escaping, leaching, dumping, or other releasing into the
Environment, whether intentional or unintentional.
"REPRESENTATIVE"--with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other
representative of such Person, including legal counsel, accountants, and
financial advisors.
"SECURITIES ACT"--the Securities Act of 1933 or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.
"SELLERS"--as defined in the first paragraph of this Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct
the business and policies of that corporation or other Person (other than
securities or other interests having such power only upon the happening of a
contingency that has not occurred) are held by the Owner or one or more of its
Subsidiaries; when used without reference to a particular Person, "Subsidiary"
means a Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the merger
of Company into Acquisition.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration,
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implementation, or enforcement of or compliance with any Legal Requirement
relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release that
may require action in order to prevent or mitigate damage to the Environment
that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made (orally or in writing) or any notice has been given (orally or in
writing) that would lead a prudent Person to conclude that such a claim,
Proceeding, dispute, action, or other matter is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this Agreement,
at the Effective Time, Company shall be merged with and into Acquisition (the
"Merger"). The separate existence and corporate organization of the Company
shall thereupon cease and the Company and Acquisition shall thereupon be a
single corporation. Acquisition shall be the surviving corporation in the
Merger (the "Surviving Corporation") and shall continue its existence under the
provisions of the Texas Business Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed by
Acquisition with the Secretary of State of the State of Texas. The Merger shall
become effective at such time as the Articles of Merger are filed with the
Secretary of State of the State of Texas, such time being hereinafter called
the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to the
Effective Time shall be and remain the
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By-Laws of the Surviving Corporation from and after the Effective Time until
amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause Xxxxxx X. Xxxxxx,
Xx., Xxxxx Xxxx and [Buyer appointments] to be appointed as directors of the
Surviving Corporation. Xxxxx Xxxx shall be employed as a Senior Vice President,
Xxxxx Xxxx shall be employed as a Vice President, Xxxxxx X. Xxxxxx, Xx. and
such appointments as Buyer shall determine shall serve as officers of the
Surviving Corporation until their successors have been elected or appointed and
shall have qualified in accordance with applicable law.
2.6 CLOSING
The closing of such Merger (the "Closing") shall be effective (i)
on the date the conditions in Sections 7 and 8 have been satisfied or otherwise
waived, or (ii) at such other date as the parties hereto shall agree in writing
(the "Closing Date"), and shall be held at the offices of Buyer's counsel at
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 at 10:00 a.m.
(local time) or such other place and methods as agreed upon by the parties.
2.7 CONVERSION OF COMPANY COMMON STOCK
At the Effective Time, by virtue of the Merger and without any
action on the part of any holder of capital stock of Buyer, Acquisition, the
Company or Sellers: (i) the shares of Common Stock of Acquisition purchased,
issued and outstanding immediately prior to the Effective Time shall be
converted as a result of the Merger and without any action on the part of the
holder thereof, into one (1) share of capital stock of the Surviving
Corporation; and (ii) the shares of the Company held by Sellers shall be
converted into and shall become, without further action on the part of the
Sellers, the right to receive six (6) times the Company's annualized EBITDA
based upon the annualized adjusted projected EBITDA for the nine (9) months
ended December 31, 1997. The Purchase Price (defined as such payable by the
Buyer) shall be Nine Hundred Sixty-Six Thousand Dollars ($966,000). The
consideration shall consist of (i) forty-five percent (45%) in shares of voting
Common Stock of Buyer which number of shares of Common Stock shall be
determined by dividing the amount determined above by Buyer's initial public
offering price per share (the "IPO Price") and (ii) fifty-five percent (55%) in
cash.
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3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers and the Company hereby jointly and severally represent
and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of Texas, with full corporate
power and authority to conduct its business as it is now being conducted, to
own or use the properties and assets that it purports to own or use, and to
perform all its obligations under Applicable Contracts. The Company is duly
qualified to do business as a foreign corporation and is in good standing under
the laws of each state or other jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where such failure to so
qualify does not have a Material Adverse Effect.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Sellers and the Company, enforceable against Sellers and the
Company in accordance with its terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally and by general equity
principles. Sellers and the Company have the absolute and unrestricted right,
power, authority, and capacity to execute and deliver this Agreement and to
perform their obligations under this Agreement. The Sellers and the Company
have approved this Agreement under applicable state corporate law provisions,
and such approval is binding.
(b) Neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time) other than as
a result of the actions of Buyer or Acquisition:
(i) contravene, conflict with, or result in a violation of (A)
any provision of the Organizational Documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the
Company;
(ii) contravene, conflict with, or result in a violation of, or
give any Governmental Body or other Person
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known to Sellers the right to challenge any of the contemplated SEC filing (but
not with regard to any matter which Sellers do not control), or to exercise any
material remedy or obtain any material relief under, any Legal Requirement or
any Order to which the Company or Sellers, or any of the assets owned or used
by the Company, may be subject;
(iii) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any material
Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or any of the assets owned or used by, the Company
other than as a result of the actions of Buyer or Acquisition;
(iv) cause Buyer or the Company to become subject to, or to
become liable for the payment of any tax other than as a result of the actions
of Buyer or Acquisition;
(v) contravene, conflict with, or result in a violation or breach
of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material Applicable Contract; or
(vi) result in the imposition or creation of any Encumbrance
other than as a result of the actions of Buyer or Acquisition upon or with
respect to any of the material assets owned or used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, neither
Sellers or the Company is or will be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
(c) Sellers are acquiring the Buyer's Common Stock for his own account
and not with a view to its distribution within the meaning of Section 2(11) of
the Securities Act. Sellers acknowledge that each certificate representing
Buyer's Common Stock acquired pursuant to this Agreement shall bear the
following restrictive legend:
THE SECURITIES REPRESENTED BY THE CERTIFICATE (THE "SHARES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THE SECURITIES MAY NOT BE
SOLD OR OFFERED FOR SALE OR OTHERWISE DISTRIBUTED WITHOUT ONE
OF THE FOLLOWING: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR
THE
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SHARES UNDER THE SECURITIES ACT, OR (ii) AN OPINION OF
COUNSEL, SATISFACTORY TO THE CORPORATION, THAT SUCH
REGISTRATION IS NOT REQUIRED AS TO SAID SALE, OFFER OR
DISTRIBUTION.
Buyer agrees to pay the reasonable fees of the opinion referred in clause (ii)
above. The issuance and delivery of such opinion shall not be unreasonably
delayed. Sellers are "accredited investors" as such term is defined in the
Securities Act of 1933. Sellers further acknowledge they each shall be subject
to such "lock-up" restriction as may be imposed by the Buyer's underwriter or
any entity regulating the issuance of the Buyer's Common Stock in its initial
public offering.
Notwithstanding the foregoing, the requirements of this Section
3.2 (c) need not be satisfied with respect to the following transactions: (i)
transactions in compliance with Rule 144 or Rule 144A; (ii) transfers by the
estate of a Seller; (iii) the transfer by any Seller by gift, will, or
intestate succession to a Family member of such Seller or to a trustee of any
trust of which such Family members are beneficiaries; (iv) transfers by a
Seller to a Related Party; or (v) transfers not involving a change in
beneficial ownership.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of 50,000
shares of common stock, $1.00 par value, of which 30,000 shares are issued and
outstanding and constitute all the shares of the Company. The Sellers are, and
will be on the Closing Date, the record and beneficial owner and holder of the
shares of the Company free and clear of all Encumbrances. All of the
outstanding shares of the Company have been duly authorized and validly issued
and are fully paid and nonassessable. There are no Contracts relating to the
issuance, sale, or transfer of any equity securities or other securities of the
Company. None of the outstanding equity securities or other securities of the
Company was issued in violation of the Securities Act or any other Legal
Requirement. The Company does not own, or has any Contract to acquire, any
equity securities or other securities of any Person or any direct or indirect
equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS
Sellers have delivered to Buyer: (a) unaudited balance sheets of
the Company as at March 31, 1996 and March 31, 1997 ("Balance Sheet") and the
related statements of income for each of the fiscal years then ended and (b) an
unaudited balance sheet of the Company as at December 31, 1997 (the "Interim
Balance Sheet") and the related statement of income for the nine
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(9) months then ended, as amended and supplemented by the Disclosure Letter, .
Such financial statements and notes fairly present in all material respects the
financial condition and the results of operations of the Company as at the
respective dates of and for the periods referred to in such financial
statements. No financial statements of any Person other than the Company are
required to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books and other records of the
Company, all of which have been made available to Buyer, are, complete and
correct and have been maintained in accordance with sound business practices.
The minute books of the Company contain accurate and complete records of all
meetings held of, and corporate action taken by, the stockholders, the Board of
Directors. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all leaseholds, or other interests therein owned by the
Company. Sellers have delivered or made available to Buyer copies of the leases
and other instruments by which the Company occupies such real property and
interests and such instruments are true, complete and accurate. The Company
owns or leases all the properties and assets (whether personal, or mixed and
whether tangible or intangible) that they purport to own or lease located in
the facilities owned or operated by the Company and reflected as owned or
leased in the books and records of the Company, including all of the properties
and assets reflected in the Balance Sheet and the Interim Balance Sheet (except
for assets held under capitalized leases disclosed or not required to be
disclosed in Part 3.6 of the Disclosure Letter and personal property sold since
the date of the Interim Balance Sheet, as the case may be, in the Ordinary
Course of Business), and all of the properties and assets purchased or
otherwise acquired by the Company since the date of the Interim Balance Sheet
(except for personal property acquired and sold since the date of the Interim
Balance Sheet in the Ordinary Course of Business and consistent with past
practice), which subsequently purchased or acquired properties and assets
(other than inventory and short-term investments) are listed in Part 3.6 of the
Disclosure Letter. All material properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet are free and clear of all Encumbrances
except with respect to all such properties and assets, except for (a) mortgages
or security interests shown on the Balance Sheet or the Interim Balance Sheet
as securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, (b) mortgages or
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security interests incurred in connection with the purchase of assets after the
date of the Interim Balance Sheet (such mortgages and security interests being
limited to the property or assets so acquired), with respect to which no
default (or event that, with notice or lapse of time or both, would constitute
a default) exists, and (c) purchase money security interests and liens for
current taxes not yet due and payable.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
[Intentionally left blank.]
3.8 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Balance Sheet, the Interim Balance Sheet or on the accounting records of the
Company as of the Closing Date (collectively, the "Accounts Receivable")
represent or will represent valid obligations arising from sales actually made
or services actually performed in the Ordinary Course of Business. To Sellers'
knowledge, there is no contest, claim, or right of set-off, other than returns
in the Ordinary Course of Business, under any Contract with any obligor of an
Accounts Receivable relating to the amount or validity of such Accounts
Receivable. Part 3.8 of the Disclosure Letter contains a complete and accurate
list of all Accounts Receivable as of the date of the Interim Balance Sheet,
which list sets forth the aging of such Accounts Receivable.
3.9 INVENTORY
All inventory of the Company, whether or not reflected in the
Balance Sheet, or the Interim Balance Sheet, consists of a quality and quantity
usable and salable in the Ordinary Course of Business, except for obsolete
items and items of below-standard quality, which in no event exceeds $10,000.
The quantities of each item of inventory are reasonable in the present
circumstances of the Company.
3.10 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.10 of the Disclosure Letter, the
Company has no liabilities or obligations of any material nature (whether
absolute, accrued, contingent, or otherwise) except for liabilities or
obligations reflected or reserved against in the Interim Balance Sheet and
current liabilities incurred in the Ordinary Course of Business since the date
thereof.
3.11 TAXES
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(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1994) all Tax Returns that are or were required to be
filed by or with respect to any of them pursuant to applicable Legal
Requirements. Sellers have delivered to Buyer copies of, and Part 3.11 of the
Disclosure Letter contains a complete and accurate list of, all such Tax
Returns filed by the Company since December 31, 1994. The Company has paid, or
made provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Part 3.11
of the Disclosure Letter and are being contested in good faith and as to which
adequate reserves have been provided in the Interim Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure Schedule, no
United States federal income Tax Returns of the Company subject to such Taxes
have been audited by the IRS. Part 3.11 of the Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by the
Company or any group of corporations including the Company for all taxable
years since December 31, 1994, and the resulting deficiencies proposed by the
IRS. Except as described in Part 3.11 of the Disclosure Letter, the Company has
not given or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other Person) of any statute of
limitations relating to the payment of Taxes of the Company or for which the
Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on
the respective books of the Company are adequate and are at least equal to the
Company's liability for Taxes. There exists no proposed tax assessment against
the Company except as disclosed in the Balance Sheet or in Part 3.11 of the
Disclosure Letter. No consent to the application of Section 341(f)(2) of the
IRC has been filed with respect to any property or assets held, acquired, or to
be acquired by the Company. All Taxes that the Company is or was required by
Legal Requirements to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by (or that include on a consolidated
basis) the Company are true, correct, and complete. There is no tax sharing
agreement that will require any payment by the Company after the date of this
Agreement.
3.12 NO MATERIAL ADVERSE CHANGE
Since the date of the Interim Balance Sheet, there has not been
any material adverse change in the business, operations, properties, prospects,
assets, or condition of the
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Company, and, no event has occurred or circumstance exists that may result in
such a material adverse change.
3.13 EMPLOYEE BENEFITS
Except as disclosed in the Disclosure Letter for group medical
insurance and associated life insurance simple XXX plans and worker's
compensation unemployment, the Company (i) has not contributed to any pension,
profit sharing, option or other incentive plan or other type of employee
benefit plan, (ii) does not maintain or has maintained, is or was a party to,
or otherwise participates or participated in, on its own behalf or on behalf of
any former employees, any pension, profit sharing, option or other incentive
plan or other type of employee benefit plan, or (iii) does not have any
obligation to, or customary arrangement with, former employees, if any, for
bonuses, incentive compensation, vacation, severance pay, sick pay, sick leave,
insurance, service award, relocation, disability or other benefits, whether
oral or written.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(i) to the best of Sellers' knowledge, the Company is, and
at all times, has been, in full compliance with each Legal Requirement that is
or was applicable to it or to the conduct or operation of its business or the
ownership or use of any of its assets;
(ii) to the best of Sellers' knowledge, no event has
occurred or circumstance exists that (with or without notice or lapse of time)
in any material respect (A) may constitute or result in a violation by the
Company of, or a failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the part of the Company
to undertake, or to bear all or any portion of the cost of, any remedial action
of any nature; and
(iii) the Company has not received, at any time, any notice
or other communication (whether oral or written) from any Governmental Body or
any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any material Legal Requirement, or (B)
any actual, alleged, possible, or potential material obligation on the part of
the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization
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that is held by the Company or that otherwise relates to the business of, or to
any of the assets owned or used by, the Company (all of which authorizations
have been delivered to Buyer). Each Governmental Authorization listed or
required to be listed in Part 3.14 of the Disclosure Letter is valid and in
full force and effect. Except as set forth in Part 3.14 of the Disclosure
Letter:
(i) to the best of Sellers' knowledge, the Company is, and
at all times has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.14 of the Disclosure Letter;
(ii) to the best of Sellers' knowledge, no event has
occurred or circumstance exists that may (with or without notice or lapse of
time) (A) constitute or result directly or indirectly in a violation of or a
failure to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter, or (B) result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter;
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential material
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (B) any actual, proposed, possible, or potential
revocation, withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications, if any, required to have been filed
for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.14 of the Disclosure Letter have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required
to have been made with respect to such Governmental Authorizations have been
duly made on a timely basis with the appropriate Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the
Disclosure Letter collectively constitute all of the Governmental
Authorizations necessary to permit the Company to lawfully conduct and operate
their businesses in the manner they currently conduct and operate such
businesses and to permit the Company to own and use their assets in the manner
in which they currently own and use such assets except where the failure to
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obtain a Governmental Authorization would not result in a material adverse
change to the Company.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) to Sellers' knowledge, that has been commenced by or
against the Company that relates to or may affect the business of, or any of
the assets owned or used by, the Company which Proceeding could have a material
adverse effect on the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Sellers and the Company, no such
Proceeding as described above has been Threatened. Sellers have delivered to
Buyer copies of all pleadings, correspondence, and other documents relating to
each Proceeding listed in Part 3.15 of the Disclosure Letter. The Proceedings
listed in Part 3.15 of the Disclosure Letter will not have a material adverse
effect on the business, operations, assets, condition, or prospects of the
Company.
(b) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject;
(ii) Sellers are not subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director, agent, or employee of the Company
is subject to any Order that prohibits such officer, director, agent, or
employee from engaging in or continuing any conduct, activity, or practice
relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure
Letter:
(i) the Company is, and at all times has been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject;
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(ii) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation
of or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject; and
(iii) the Company has not received any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is or has been
subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.16 of the Disclosure Letter, since the
date of the Interim Balance Sheet, the Company has conducted its business only
in the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any security convertible into such capital stock; grant of
any registration rights; purchase, redemption, retirement, or other acquisition
by the Company of any shares of any such capital stock; or declaration or
payment of any dividend or other distribution or payment in respect of shares
of capital stock except as agreed to by Buyer in writing;
(b) amendment to the Organizational Documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries,
distributions or other compensation to any stockholder, director, officer, or
employee;
(d) adoption of, or increase in the payments to or benefits under,
any profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely
affecting the properties, assets, business, financial condition, or prospects
of the Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination
of (i) any license, distributorship, dealer, sales representative, joint
venture, credit, or similar
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agreement, or (ii) any Contract or transaction involving a total remaining
commitment by or to the Company of at least $10,000.
(g) except in the Ordinary Course of Business, sale, lease, or other
disposition of any asset or property (other than inventory in the Ordinary
Course of Business) of the Company or mortgage, pledge, or imposition of any
lien or other encumbrance on any material asset or property of the Company,
including the sale, lease, or other disposition of any of the intellectual
property assets;
(h) cancellation or waiver of any claims or rights with a value to
the Company in excess of $10,000;
(i) material change in the accounting methods used by the Company;
or
(j) agreement, whether oral or written, by the Company to do any of
the foregoing.
3.17 CONTRACTS; NO DEFAULTS
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete copies,
of:
(i) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $15,000;
(ii) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $15,000;
(iii) each Applicable Contract that was not entered into in
the Ordinary Course of Business and that involves expenditures or receipts of
the Company in excess of $15,000;
(iv) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $15,000 and with terms of less than one
year);
(v) each licensing agreement or other Applicable Contract
with respect to patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants,
or contractors
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regarding the appropriation or the non-disclosure of any of the Intellectual
Property Assets;
(vi) each collective bargaining agreement and other
Applicable Contract to or with any labor union or other employee representative
of a group of employees;
(vii) each joint venture, partnership, and other Applicable
Contract (however named) involving a sharing of profits, losses, costs, or
liabilities by the Company with any other Person;
(viii) each Applicable Contract containing covenants that in
any way purport to restrict the business activity of the Company or any
Affiliate of the Company or limit the freedom of the Company or any Affiliate
of the Company to engage in any line of business or to compete with any Person;
(ix) each Applicable Contract providing for payments to or by
any Person based on sales, purchases, or profits, other than direct payments
for goods and sales commission arrangements for employees;
(x) each power of attorney granted by the Company that is
currently effective and outstanding;
(xi) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express
undertaking by the Company to be responsible for consequential damages;
(xii) each Applicable Contract for future capital
expenditures in excess of $15,000;
(xiii) each currently effective written warranty, guaranty,
indemnity, and or other similar undertaking with respect to contractual
performance extended by the Company other than in the Ordinary Course of
Business;
(xiv) each Contract for indebtedness of the Company involving
future aggregate payments of more than $15,000; and
(xv) each amendment, supplement, and modification (whether
oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
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(i) Sellers (and no Related Person of the Sellers) do not
have or may acquire any rights under, and Sellers do not have or may become
subject to, any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(ii) no officer, director, agent, employee, consultant, or
contractor of the Company is bound by any Contract that purports to limit the
ability of such officer, director, agent, employee, consultant, or contractor
to (A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter,
each Contract, to Sellers' knowledge, identified or required to be identified
in Part 3.17(a) of the Disclosure Letter is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) To Sellers' knowledge and except as set forth in Part 3.17(d) of
the Disclosure Letter:
(i) the Company is, and at all times has been, in full
compliance with all applicable terms and requirements of each Contract under
which the Company has or had any material obligation or liability or by which
the Company or any of the material assets owned or used by the Company is or
was bound;
(ii) each other Person that has or had any material
obligation or liability under any Contract under which the Company has or had
any rights is in full compliance with all material applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists that (with
or without notice or lapse of time) may contravene, conflict with, or result in
a violation or breach of, or give the Company or other Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity
or performance of, or to cancel, terminate, or modify, any Applicable Contract;
and
(iv) the Company has not given to or received from any other
Person, any notice or other communication (whether oral or written) regarding
any actual, alleged, possible, or potential violation or breach of, or default
under, any Applicable Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material
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amounts paid or payable to the Company under current or completed Applicable
Contracts with any Person and, to Sellers' Knowledge, no such Person has made
written demand for such renegotiation.
(f) The Applicable Contracts relating to the sale or provision of
products or services by the Company have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been
paid or promised, that is or would be in violation of any Legal Requirement.
(g) The Company has made available to Buyer true, complete and
correct copies of the Contracts required to be set forth in Part 3.17 of the
Disclosure Letter.
3.18 INSURANCE
(a) Sellers have made available to Buyer:
(i) true and complete copies of all policies of insurance to
which the Company is a party or under which the Company, or any director of the
Company, is covered; and
(ii) true and complete copies of all pending applications for
policies of insurance.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder;
(ii) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and
(iii) all obligations of the Company to third parties with
respect to insurance (including such obligations under leases and service
agreements) and identifies the policy under which such coverage is provided.
(c) All material assets, properties and risks of the Company are,
and for the past three years have been, covered by valid and, except for
policies that have expired under their terms in the ordinary course, currently
effective insurance policies or binders of insurance (including, without
limitation, general liability insurance, property insurance and workers'
compensation insurance) issued in favor of the Company. There has not been any
claim under any such insurance policy during the
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past three years that could reasonably be expected to have a material adverse
effect on the Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(i) Since January 1, 1994 the Company has not received (A)
any refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other
indication that any insurance policy is no longer in full force or effect or
will not be renewed or that the issuer of any policy is not willing or able to
perform its obligations thereunder.
(ii) The Company has paid all premiums due, and have
otherwise performed all of their obligations, under each policy to which the
Company is a party or that provides coverage to the Company or director
thereof.
(iii) The Company has given notice to the insurer of all
claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the Disclosure Letter:
(a) The Company is, and at all times has been, in material
compliance with, and has not been and is not in material violation of or liable
under, any Environmental Law. Neither Sellers or the Company have any
reasonable basis to expect, nor has any of them received, any written or
Threatened Order, notice, or other written communication from (i) any
Governmental Body, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, or of any actual or Threatened obligation to undertake or
bear the cost of any Environmental, Health, and Safety Liabilities with respect
to any of the Facilities or any other properties or assets (whether real,
personal, or mixed) in which Sellers or the Company has had an interest, or
with respect to any property or Facility at or to which Hazardous Materials
were generated, manufactured, refined, transferred, imported, used, or
processed by Sellers, or the Company, or from which Hazardous Materials have
been transported, treated, stored, handled, transferred, disposed, recycled, or
received.
(b) There are no pending or, to the Knowledge of Sellers and the
Company, Threatened claims, Proceedings or Encumbrances relating to any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or
any
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other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(c) Neither Sellers or the Company have any reasonable basis to
expect, nor has any of them received, any written citation, directive, inquiry,
notice, Order, summons, warning, or other written communication that relates to
Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential
violation or failure to comply with any Environmental Law, or of any alleged,
actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) The Company has no Environmental, Health, and Safety Liabilities
with respect to the Facilities or with respect to any other properties and
assets (whether real, personal, or mixed) in which the Company has or had an
interest except liabilities which would cause a material adverse effect on the
Company..
(e) To Sellers' knowledge, there are no Hazardous Materials present
on or in the Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills, land
deposits, dumps, equipment (whether moveable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities, or incorporated into any structure therein
or thereon. The Company has not permitted or conducted any Hazardous Activity
conducted with respect to the Facilities or any other properties or assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(f) There has been no Release or, to Sellers' knowledge, Threat of
Release, of any Hazardous Materials at or from the Facilities, or from or by
any other properties and assets (whether real, personal, or mixed) in which the
Company has or had an interest.
(g) Sellers have delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Sellers or the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities, or concerning compliance by the
Company with Environmental Laws.
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(h) There are no underground (to Sellers' knowledge) or above-ground
storage tanks, incinerators or surface impoundments at, on, or under or within
any real property operated or controlled, in whole by the Company.
3.20 EMPLOYEES
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information for each employee or director of the
Company, including each employee on leave of absence or layoff status:
employer; name; job title; current compensation paid or payable and any change
in compensation since December 31, 1997; vacation accrued; and service credited
for purposes of vesting and eligibility to participate under the Company's
insurance, medical, welfare, or vacation plan, or any other employee benefit
plan.
(b) No employee (to Sellers' knowledge other than an officer) or
director of the Company is a party to, or is otherwise bound by, any agreement
or arrangement, including any confidentiality, non-competition, or proprietary
rights agreement, between such employee or director and any other Person
("Proprietary Rights Agreement") that in any way adversely affects or will
affect (i) the performance of his duties as an employee or director of the
Company, or (ii) the ability of the Company to conduct its business, including
any Proprietary Rights Agreement with Sellers or the Company by any such
employee or director. No director, officer, or other key employee of the
Company presently intends to terminate his employment with the Company.
3.21 LABOR RELATIONS; COMPLIANCE
The Company has not been or is a party to any collective bargaining
or other labor Contract. There has not been, there is not presently pending or
existing, and to Sellers' Knowledge there is not threatened, (a) any strike,
slowdown, picketing, work stoppage, or employee grievance process, (b) any
proceeding against or affecting the Company relating to the alleged violation
of any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To Sellers'
knowledge, no event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by the Company, and no such action is contemplated by the Company.
The Company has complied in all respects with all Legal Requirements relating
to employment,
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equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar
taxes, occupational safety and health, and plant closing except where the
failure to comply would create a material adverse effect to Company. The
Company is not liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY
(a) The Company does not own or licenses for use any patents,
trademarks, trade names, service marks, mask works or copyrights.
(b) There has not been any actual or alleged infringement or use or
misuse by any party of the Company's trade secrets, confidential information or
other intellectual property rights.
3.23 CERTAIN PAYMENTS
To Sellers' knowledge, neither the Company or any director, officer,
agent, or employee of the Company, or any other person associated with or
acting for or on behalf of the Company, has directly or indirectly and in
violation of any Legal Requirement (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback, or other payment to any person,
private or public, regardless of form, whether in money, property, or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions
or for special concessions already obtained, for or in respect of the Company
or any Affiliate of the Company, (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company.
3.24 DISCLOSURE
(a) No representation or warranty of Sellers in this Agreement and
no statement in the Disclosure Letter knowingly omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any untrue
statement or omit to state a material fact necessary to make the statements
therein or in this Agreement, in light of the circumstances in which they were
made, not misleading.
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3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Part 3.25 of the Disclosure Letter, neither
Sellers or any Related Person of Sellers or of the Company has any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Company's business. Neither Sellers
or any Related Person of Sellers or of the Company owns (of record or as a
beneficial owner) an equity interest or any other financial or profit interest
in, a Person that (i) has business dealings or a material financial interest in
any transaction with the Company, or (ii) engages in competition with the
Company with respect to any line of the products or services of the Company (a
"Competing Business") in any market presently served by the Company. Except as
set forth in Part 3.25 of the Disclosure Letter, neither Sellers or any Related
Person of Sellers or of the Company is a party to any Contract with, or has any
claim or right against the Company that will survive the Closing.
3.26 BROKERS OR FINDERS
Sellers, the Company and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF ACQUISITION AND BUYER
Acquisition and Buyer (the "Buyer Companies") jointly and severally
represent and warrant to Sellers as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Each of Acquisition and Buyer
has the corporate power and authority to own or lease and operate its
properties to carry on its business as now being conducted, and is duly
qualified and in good standing and authorized to do business as a foreign
corporation in each jurisdiction in which the character of its properties or
the nature of its business requires such qualification and authorization except
where the failure to so qualify would not have a material adverse effect on the
Buyer and Acquisition, taken as a whole.
4.2 AUTHORITY
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Each of Acquisition and Buyer has the corporate power and has taken
all necessary corporate action to authorize Acquisition or Buyer as the case
may be, to execute, deliver and perform the Agreement and to consummate the
transactions contemplated thereby. The execution and delivery by each of
Acquisition and Buyer of this Agreement and the Employment Agreement to which
each is a party constitutes the valid and legally binding obligation of
Acquisition or Buyer, as the case may be, enforceable in accordance with the
documents' terms, except as may be limited by bankruptcy, insolvency or other
laws effecting creditors' rights generally.
4.3 CAPITALIZATION
As of the date hereof, the authorized common stock of the Buyer
consist of 50,000,000 shares of common stock, $.001 par value per share, of
which 4,712,372 shares are issued and outstanding (excluding shares to be
issued in the Buyer's Initial Public Offering or in other acquisitions. All of
the outstanding common stock of the Buyer has been duly authorized and validly
issued and are fully paid and nonassessable. The shares of the Buyer's Common
Stock to be delivered to Sellers at Closing pursuant to Section 2.7 will be
duly authorized, validly issued, fully paid and non-assessable.
4.4 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other
records of the Buyer, are complete, in all material respects, and correct and
have been maintained in accordance with sound business practices, including the
maintenance of an adequate system of internal controls.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against Buyer
or Acquisition and that challenges, or may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the
contemplated transactions. To Buyer's and Acquisition's knowledge, no such
proceeding has been threatened.
4.6 BROKERS OR FINDERS
Buyers and Acquisition and their officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or finders'
fees or agents' commissions or other similar payment in connection with this
Agreement and will indemnify and hold the Company and Sellers harmless from any
such payment alleged to be due by or through Buyer or Acquisition as a result
of the action of Buyer and Acquisition or their officers or agents.
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4.7 NO FURTHER APPROVAL. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Authority is required by or with respect to Buyer, or Acquisition in connection
with the execution and delivery of this Agreement or the consummation by Buyer
or Acquisition of the Contemplated Transactions except as contemplated by this
Agreement.
4.8 EXCHANGE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
Buyer and Acquisition in reliance upon Buyer's and Acquisition's
representations to the Sellers, which by Buyer's and Acquisition's execution of
this Agreement Buyer and Acquisition hereby confirm, that shares of stock to be
received by Buyer will be acquired for investment for Buyer's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that Buyer has no present intention of granting any
participation in, or otherwise distributing the same. By executing this
Agreement, Buyer further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person or to any third person, with respect to
shares of stock.
4.9 INTENTION OF BUYER. Buyer has no current plan or intention to
liquidate Acquisition, or to merge with and into another corporation, to sell
or otherwise dispose of the stock of or to cause to sell or otherwise dispose
of any of its assets or any of the assets acquired from the Contemplated
Transactions.
5. COVENANTS OF SELLERS AND THE COMPANY PRIOR TO CLOSING DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Sellers will, and will cause the Company and its Representatives to, (a) afford
Buyer and its Representatives and prospective lenders and their Representatives
(collectively, "Buyer's Advisors") full and free access to the Company's
personnel, properties (including subsurface testing), contracts, books and
records, and other documents and data, (b) furnish Buyer and Buyer's Advisors
with copies of all such contracts, books and records, and other existing
documents and data pertaining to the Company as Buyer may reasonably request,
and (c) furnish Buyer and Buyer's Advisors with such additional financial,
operating, and other data and information pertaining to the Company as Buyer
may reasonably request.
5.2 OPERATION OF THE BUSINESS OF THE COMPANY
Between the date of this Agreement and the Closing Date,
Sellers will cause the Company to:
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(a) conduct the business of the Company only in the Ordinary Course
of Business;
(b) use reasonable commercial efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with the Company;
(c) confer with Buyer concerning operational matters of a material
nature; and
(d) otherwise report periodically to Buyer concerning the status of
the business, operations, and finances of the Company if any consent of Buyer
is requested by Seller or the Company; Buyer shall promptly, but no later than
thirty (30) days after notice, respond to such request.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement, between
the date of this Agreement and the Closing Date, Sellers will not, and will
cause the Company not to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement, Sellers
will, and will cause the Company to, make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Sellers
will, and will cause the Company to, (a) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (b) cooperate with
Buyer in obtaining any required consents.
5.5 NOTIFICATION
Between the date of this Agreement and the Closing Date, Sellers
will promptly notify Buyer in writing if Sellers become aware of any fact or
condition that causes or constitutes a material Breach of any of Sellers'
representations and warranties as of the date of this Agreement, or if Sellers
become aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by
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this Agreement) cause or constitute a Breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. Should any such fact or
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, Sellers will promptly deliver to Buyer a supplement to the
Disclosure Letter specifying such change. During the same period, Sellers will
promptly notify Buyer of the occurrence of any Breach of any covenant of
Sellers in this Section 5 or of the occurrence of any event that may make the
satisfaction of the conditions in Section 7 impossible or unlikely.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated pursuant to
Section 10, Sellers will not, and the Company will not and each of their
Representatives will not directly or indirectly solicit, initiate or encourage,
accept or discuss any inquiries or proposals from, discuss or negotiate with,
provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets of the Company,
or any of the capital stock of the Company, or any merger, consolidation,
business combination, or similar transaction involving the Company. Sellers or
the Company will promptly notify Buyer of any such inquiries or proposals.
5.7 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Sellers and
the Company will use their Best Efforts to cause the conditions in Section 7 to
be satisfied.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 NOTIFICATION
Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Sellers in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or
Acquisition's representations and warranties as of the date of this Agreement,
or if Buyer becomes aware of the occurrence after the date of this Agreement or
any fact or condition that would, except as expressly contemplated by this
Agreement, cause or constitute a Breach of any such representation or warranty.
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6.2 BEST EFFORTS
Between the date of this Agreement and the Closing Date, Buyer will
use its Best Efforts to cause the conditions in Section 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S AND ACQUISITION'S OBLIGATION TO
CLOSE
Buyer's and Acquisition's obligations to consummate the Merger and
to take the other actions required to be taken by Buyer and Acquisition at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Buyer and Acquisition,
in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS
All of Sellers' and the Company's representations and warranties in
this Agreement must have been accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter.
7.2 SELLERS' PERFORMANCE
(a) All of the covenants and obligations that Sellers and the
Company are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing, must have been duly performed and complied with in all
material respects.
(b) There shall be delivered at Closing (i) the Employment
Agreements with Xxxxx Xxxx and Xxxxx Xxxx ("Xxxx") in the forms of Exhibit
7.2(b)(i) (the "Employment Agreement") executed by Xxxx and (ii) the
certificate executed by Sellers and an officer of the Company representing to
Buyer and Acquisition that Sellers' and the Company's representations and
warranties in this Agreement was accurate in all material respects as to the
date of this Agreement and is accurate in all material respects as of the
Closing as if made on the Closing Date, and (iii) each of the other covenants
and obligations in the Agreement must have been performed and complied with in
all respects.
7.3 CONSENTS
[NOT APPLICABLE; INTENTIONALLY LEFT BLANK.]
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to Buyer:
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(a) an opinion of Olson, Gibbons, Nicoud, Xxxxx Xxxxxxx & Xxxxx,
L.L.P. dated the Closing Date, in the form of Exhibit 7.4(a);
(b) such other documents as Buyer or its counsel may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Sellers'
and the Company's representations and warranties, (iii) evidencing the
performance by Sellers, the Company, or the compliance by Sellers or the
Company with, any covenant or obligation required to be performed or complied
with by such party, (iv) evidencing the satisfaction of any condition referred
to in this Section 7, or (v) otherwise facilitating the consummation or
performance of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS
Since the date of this Agreement, there must not have been
commenced, pending or Threatened any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Merger consideration.
7.7 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
7.8 NO INJUNCTION
No preliminary or permanent injunction or other order by any federal
or state court preventing or consummation of
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the transactions contemplated in this Agreement has been issued and continues
in effect, and this Agreement and the transactions contemplated hereby are not
prohibited under any applicable federal or state law or regulation.
7.9 MATERIAL ADVERSE CHANGE
There shall have been no material adverse change in the business,
operations, prospects, financial condition or results of the Company.
7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering on or before
September 30, 1998.
8. CONDITIONS PRECEDENT TO SELLERS' AND THE COMPANY'S OBLIGATION TO
CLOSE
Sellers' and the Company's obligations to consummate the Merger and
to take the other actions required to be taken by Sellers and the Company at
the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Sellers and the
Company, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS
All of Buyer's and Acquisition's representations and warranties in
this Agreement must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
8.2 BUYER'S AND ACQUISITION'S PERFORMANCE
(a) All of the covenants and obligations that Buyer and Acquisition
are required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been performed and complied with in all material
respects.
(b) Buyer must have executed and delivered (i) the Employment
Agreement (ii) a certificate executed by an officer of Buyer representing to
Sellers that Buyer and Acquisition's representations and warranties contained
in this Agreement were accurate in all material respects as to the date of this
Agreement and is accurate in all material respects as of the Closing as if made
on the Closing.
8.3 ADDITIONAL DOCUMENTS
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Buyer and Acquisition must have caused the following documents to be
delivered to Sellers:
(a) an opinion of Atlas, Xxxxxxxx, Trop & Borkson, P.A., dated the
Closing Date, in the form of Exhibit 8.3(a); and
(b) such other documents as Sellers or their counsel may reasonably
request for the purpose of (i) enabling its counsel to provide the opinion
referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition, (iv) evidencing the satisfaction of any
condition referred to in this Section 8, or (v) otherwise facilitating the
consummation or performance of any of the Contemplated Transactions.
(c) Buyer shall provide to Sellers a copy of Buyer's registration
statement concerning its initial public offering as filed with the Securities
and Exchange Commission.
8.4 NO CLAIM REGARDING STOCK OWNERSHIP OR MERGER PROCEEDS
There must not have been made or Threatened by any Person any claim
asserting that such Person (a) is the holder or the beneficial owner of, or has
the right to acquire or to obtain beneficial ownership of, any stock of, or any
other voting, equity, or ownership interest in, the Company, or (b) is entitled
to all or any portion of the Merger consideration.
8.5 NO PROHIBITION
Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), materially contravene, or conflict with, or result in a
violation of, or cause Buyer or any Person affiliated with Buyer to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or
Order, or (b) any Legal Requirement or Order that has been published,
introduced, or otherwise proposed by or before any Governmental Body.
8.6 NO INJUNCTION
No preliminary or permanent injunction or other order by any federal
or state court preventing or consummation of the transactions contemplated in
this Agreement has been issued and continues in effect, and this Agreement and
the transactions
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contemplated hereby are not prohibited under any applicable federal or state
law or regulation.
8.7 RELEASE OF GUARANTIES
At the Closing, Buyer will have agreed to either (a) remove, (b)
make provision for, or (c) agree to indemnify Sellers on account of any
guaranties of Sellers set forth in Schedule 8.7.
8.8 CONSUMMATION OF RELATED TRANSACTIONS
On or prior to the Closing Date, each of the corporations listed on
Schedule 8.8 hereto, shall have merged with or into a wholly-owned subsidiary
of the Buyer or have otherwise become a wholly-owned subsidiary of Buyer.
8.9. RULE 144 REPORTING
With a view to making available the benefits of certain rules and
regulations of the Commission that may permit, subject to any lockup agreement
executed by Sellers, the sale of the Shares to the public without registration,
after such time as a public market exists for the Shares, the Buyer agrees to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act.
(b) For a period of two years from Closing file with the
Commission in a timely manner all reports and other documents required of the
Buyer under the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements);
(c) Until two years from the closing of this Agreement to
furnish to the Seller forthwith upon request a written statement by the Buyer
as to its compliance with the public information requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Buyer for an offering of its securities to the general
public), and the reporting requirements of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements), a
copy of the most recent annual or quarterly report of the Buyer, and such other
reports and documents so filed by the Buyer as a Seller may reasonably request
in availing itself of any rule or regulation of the Commission allowing a
Seller to sell any such securities without registration.
8.10 INITIAL PUBLIC OFFERING
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Buyer shall have completed its Initial Public Offering on or before
September 30, 1998.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the Closing, be
terminated:
(a) by either Buyer and Acquisition or Sellers and the Company if a
material Breach of any provision of this Agreement has been committed by the
other party and such Breach has not been cured or waived within ten (10) days
of the date of notification of such Breach;
(b) (i) by Buyer and Acquisition if any of the conditions in Section
7 has not been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of Buyer to
comply with its obligations under this Agreement) and Buyer has not waived such
condition on or before the Closing Date; or (ii) by Sellers and the Company, if
any of the conditions in Section 8 has not been satisfied of the Closing Date
or if satisfaction of such a condition is or becomes impossible (other than
through the failure of Sellers and the Company to comply with their obligations
under this Agreement) and Sellers have not waived such condition on or before
the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Sellers and the
Company; or
(d) by either Buyer and Acquisition or Sellers and the Company if
the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before September 30, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, the exercise of
a right of termination will not be an election of remedies. If this Agreement
is terminated pursuant to Section 9.1, all further obligations of the parties
under this Agreement terminate, except the obligations in Section 11.1 and 11.3
will survive; provided, however, that if this Agreement is terminated by a
party because of a breach of the Agreement by the other party or because one or
more of the conditions to the terminating
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party's obligations is not satisfied as a result of the other party's failure
to comply with its obligations under this Agreement, the terminating party's
right to pursue all legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter and any of the supplements thereto, and any
other certificate or document delivered pursuant to this Agreement will survive
the Closing until the sixteen (16) months from the Closing. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS
Sellers will indemnify and hold harmless Buyer, Acquisition, the
Surviving Corporation, and their respective Representatives, stockholders,
controlling persons, and affiliates (collectively, the "Indemnified Persons")
for, and will pay to the Indemnified Persons the amount of, any loss,
liability, claim, damage, expense (including costs of investigation and defense
and reasonable attorneys' and other professional fees), whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in
this Agreement, after giving effect to any Disclosure Letter, as amended, and
supplemented from time to time, and any other certificate or document delivered
by Sellers pursuant to this Agreement;
(b) any Breach by Sellers or the Company of any covenant or
obligation of Sellers or the Company in this Agreement;
(c) any product shipped or any services provided by Company prior to
the Closing Date; and
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Sellers or the Company (or
any Person acting on their behalf) in connection with any of the Contemplated
Transactions.
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The remedies provided in this Section 10.2 will not be exclusive of
or limit any other remedies that may be available to Buyer or the other
Indemnified Persons.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Sellers for, and will pay to
the Sellers the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense and reasonable attorneys' and
other professional fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any Breach of any representation or warranty made by Buyer in
this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in
this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with Buyer (or any Person acting
on their behalf) in connection with any of the Contemplated Transactions; and
(d) any third party claim on account of Buyer's initial public
offering, other than as a result of actions or statements of Sellers or the
Company.
The remedies provided in this Section 10.3 will not be exclusive of
or limit any other remedies that may be available to Sellers.
10.4 TIME LIMITATIONS AND DOLLAR LIMITATIONS
If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and complied with prior to the
Closing, unless on or before twelve (12) months from the date of Closing, Buyer
notifies Sellers of a claim specifying the factual basis of that claim.
If the Closing occurs, Buyer will have no liability (for
indemnification or otherwise) with respect to any representation or warranty,
or covenant or obligation to be performed and to comply with prior to the
Closing Date, unless on or before twelve (12) months from the date of Closing,
Sellers notify Buyer of claims specifying the factual basis of that claim
except for those provisions of Sections 8.9 - 8.10 shall survive.
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Neither Sellers nor Company will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a), clause (b) or, to the extent relating to any failure to perform or comply
prior to the Closing, clause (c) of Section 10.2 until the total of all Damages
with respect to such matters exceeds $10,000, and then only for the amount by
which such Damages exceed $10,000. Notwithstanding anything herein to the
contrary, the maximum amount Sellers shall be liable for indemnification claims
shall not exceed $425,000 in the aggregate provided, however, that such
limitation shall be $966,000 for any breach of a representation or warranty
contained in Sections 3.11 and 3.19. In case of a breach of a representation
and warranty contained in Sections 3.11 and 3.19, Sellers may at their option,
settle a portion of such claims for indemnification with shares of Buyer's
Common Stock received by Sellers under this Agreement. For purposes of this
indemnification, such shares shall be valued at the IPO Price for Buyer's
Common Stock.
Neither Buyer nor Acquisition will have any liability (for
indemnification or otherwise with respect to any matters described in Section
10.3 until the total of all damages with respect to such matters exceeds
$10,000, then only for the amount by which such damage exceeds $10,000.
Notwithstanding anything herein to the contrary, the maximum amount the Company
shall be liable for indemnification claims shall not exceed $450,000 in the
aggregate.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Sections
10.2 or 10.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement
of such claim, but the failure to notify the indemnifying party will not
relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.5(a) is brought
against an indemnified party and it gives notice, unless the claim involves
Taxes, to the indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding and, to
the extent that it wishes (unless (i) the indemnifying party is also a party to
such Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide
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reasonable assurance to the indemnified party of its financial capacity to
defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section 10 for any fees of other
counsel or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in connection with
the defense of such Proceeding other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that
are paid in full by the indemnifying party; and (iii) the indemnified party
will have no liability with respect to any compromise or settlement of such
claims effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will be bound by any determination made in
such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding,
but the indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
10.6 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS
A claim may be asserted by notice to the party from whom
indemnification is sought.
11. GENERAL PROVISIONS
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11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with
the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants.
11.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this
Agreement or the Contemplated Transactions will be issued, if at all, at such
time and in such manner as Buyer determines. Unless consented to by Buyer in
advance or required by Legal Requirements, prior to the Closing Sellers shall,
and shall cause the Company to, keep this Agreement strictly confidential and
may not make any disclosure of this Agreement to any Person other than their
professional advisors. Sellers and Buyer will consult with each other
concerning the means by which the Company's employees, customers, and suppliers
and others having dealings with the Company will be informed of the
Contemplated Transactions, and Buyer will have the right to be present for any
such communication.
11.3 CONFIDENTIALITY
(a) Between the date of this Agreement and the Closing Date, Buyer
and Sellers will maintain in confidence, and will cause the directors,
officers, employees, agents, and advisors of Buyer, Acquisition and the Company
to maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
another party or the Company in connection with this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. Notwithstanding the foregoing, Buyer may disclose
information about this Agreement, the Sellers, or the Company in connection
with its initial public offering and any related obligations therewith.
(b) If the Contemplated Transactions are not consummated, each party
will return or destroy as much of such written information as the other party
may reasonably request and agree to keep any confidential information
confidential.
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11.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when
(a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the
other parties):
Sellers: Metro Data Supply, Inc.
Xxxx Xxxxxx Xxx 0000
Xxxxx, Xxxxx 00000
Attention: Xxxxx Xxxx
with a copy to: Olson, Gibbons, Nicoud, Birne, Xxxxxxx &
Xxxxx, LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile No.: (000) 000-0000
Buyer or Acquisition: Office Center Corporation
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Xx.
Facsimile No.: (000) 000-0000
with a copy to: Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
11.5 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such
further information, (b) to execute and deliver to each other such other
documents, and (c) to do such other acts and things, all as the other party may
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to in this Agreement.
11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or
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privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement and the Disclosure Letter supersedes all prior
agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement
without the prior consent of the other parties. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon, and
inure to the benefit of the heirs, successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed
to give any Person other than the parties to this Agreement any legal or
equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid or
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unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
11.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Agreement. All words used in this Agreement will be construed
to be of such gender or number as the circumstances require. Unless otherwise
expressly provided, the word "including" does not limit the preceding words or
terms.
11.11 TIME OF ESSENCE
With regard to all dates and time periods set forth or referred to
in this Agreement, time is of the essence.
11.12 GOVERNING LAW
This Agreement will be governed by the laws of the State of Delaware
without regard to conflicts of laws principles.
11.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLERS:
OFFICE CENTRE CORPORATION /s/Xxxxx Xxxx
-----------------------------
XXXXX XXXX
By: /s/Xxxxxx X. Xxxxxx, Xx.
--------------------------- /s/Xxxx Xxxx
-------------------------
Name: XXXX XXXX
Title:
ACQUISITION:
OFFICE CENTRE FORT WORTH, INC.
By: /s/Xxxxxx X. Xxxxxx, Xx.
-------------------------------
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Name: Xxxxxx X. Xxxxxx, Xx.
Title:
COMPANY:
METRO DATA SUPPLY, INC.
By: /s/Xxxxx Xxxx
------------------------------------
Name: Xxxxx Xxxx
Title: President
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METRO DATA SUPPLY, INC.
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 3.1 Organization
Exhibit 3.2 Resolutions
Exhibit 3.3 Capitalization
Exhibit 3.4 Financial Statements
Exhibit 3.6 Assets
Exhibit 3.8 Accounts Receivable
Exhibit 3.9 Inventory
Exhibit 3.10 Liabilities
Exhibit 3.11 Taxes
Exhibit 3.14 Governmental Requirements
Exhibit 3.17 Contracts
Exhibit 3.18 Insurance
Exhibit 3.20 List of Employees
Exhibit 3.25 Relationships with Related Persons
Exhibit 7.2(b)(i) The "Employment Agreement"
Exhibit 7.4(a) Opinion of Olson, Gibbons, Nicoud, Xxxxx
Xxxxxxx & Xxxxx, L.L.P.
Exhibit 8.3(a) Opinion of Atlas, Xxxxxxxx, Trop &Borkson, P.A.
SCHEDULES
---------
Schedule 3.1 Organization and Good Standing
Schedule 3.2 Authority
Schedule 3.3 Capitalization
Schedule 3.4 Financial Statements
Schedule 3.5 Books and Records
Schedule 3.6 Real Property; Encumbrances
Schedule 3.7 Condition and Sufficiency of Assets
Schedule 3.8 Accounts Receivable
Schedule 3.9 Inventory
Schedule 3.10 No Undisclosed Liabilities
Schedule 3.11 Taxes
Schedule 3.12 No Material Adverse Change
Schedule 3.13 Employee Benefits
Schedule 3.14 Compliance with Legal Requirements;
Governmental Authorizations
Schedule 3.15 Legal Proceedings; Orders
Schedule 3.16 Absence of Certain Changes and Events
Schedule 3.17 Contracts
Schedule 3.18 Insurance
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.21 Labor Relations; Compliance
Schedule 3.22 Intellectual Property
Schedule 3.23 Certain Payments
Schedule 3.25 Relationship with Related Parties
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.