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EXHIBIT 2.13
MERGER AGREEMENT
THIS MERGER AGREEMENT ("Agreement") is made as of May 15, 1998, by and
among OFFICE CENTRE CORPORATION, a Delaware corporation ("Buyer"), OFFICE CENTRE
NEW ENGLAND, a Delaware corporation to be formed as a wholly-owned subsidiary of
Buyer ("Acquisition"), NEW ENGLAND OFFICE SUPPLY COMPANY, a Massachusetts
corporation ("Company"), ▇▇▇▇▇▇ ▇▇▇▇▇, an individual resident in Massachusetts
(the "Seller" or "Shareholder").
RECITALS
WHEREAS, Buyer, Acquisition, the Company and the Seller 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.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"APPLICABLE CONTRACT"--any Contract (a) under which the
Company has or may acquire any rights, (b) under which the Company has or may
become subject to any obligation or liability, or (c) by which the Company or
any of the assets owned, leased or used by it is or may become bound.
"BALANCE SHEET"--as defined in Section 3.4.
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"BEST EFFORTS"--the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH"--a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been any 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 or failure.
"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
Seller of their respective covenants and obligations under this Agreement; and
"CONTRACT"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES"--as defined in Section 10.2.
"DISCLOSURE LETTER"--the disclosure letter delivered by Seller
and the Company to Buyer concurrently with the execution and delivery of this
Agreement.
"EBITDA"--earnings before interest, taxes, depreciation and
amortization, as adjusted.
"EMPLOYMENT AGREEMENT"--as defined in Section 7.2.
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"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.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES"--any cost,
damages, expense, liability, or obligation, arising from or under Environmental
Law or Occupational Safety and Health Law and consisting of or relating to:
(a) any environmental, health, or safety matters or conditions
(including on-site or off-site contamination, occupational safety and health,
and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or
Occupational Safety and Health Law for cleanup costs or corrective action,
including any investigation, cleanup, removal, containment, or other remediation
or response actions ("Cleanup") required by applicable Environmental Law or
Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative, or
remedial measures required under Environmental Law or Occupational Safety and
Health Law.
The terms "removal," "remedial," and "response action,"
include the types of activities covered by the United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. 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;
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(d) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other potentially
hazardous substances;
(e) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or prevention;
(f) pollution, contamination, protection of the Environment,
human health or safety.
"ERISA"--the Employee Retirement Income Security Act of 1974
or any successor law, and regulations and rules issued pursuant to that Act or
any successor law.
"FACILITIES"--any real property, leaseholds, or other
interests currently owned or operated by the Company and any buildings, plants,
structures, or equipment (including motor vehicles, tank cars, and rolling
stock) currently owned or operated by the Company.
"GAAP"--generally accepted United States accounting
principles, applied on a basis consistent with the basis on which the Balance
Sheet and the other financial statements referred to in Section 3.4 were
prepared.
"GOVERNMENTAL AUTHORIZATION"--any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY"--any:
(a) nation, state, county, city, town or district government;
(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).
"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.
"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.
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"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 individual is actually aware of
such fact or other matter or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the ordinary
course of business.
A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as a director or officer of such Person has Knowledge of such fact or
other matter.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, or
other administrative order, constitution, law, ordinance, regulation, or
statute.
"MATERIAL ADVERSE EFFECT"--means a material adverse effect on
the business, properties, condition (financial and otherwise) or operations of
the Company.
"OCCUPATIONAL SAFETY AND HEALTH LAW"--any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, and any program designed to provide safe
and healthful working conditions.
"ORDER"--any award, decision, injunction, judgment, order,
ruling, subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS"--an action taken by a Person
will be deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day operations
of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of businesses as such Person.
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"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.
"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 immediate 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, "Material Interest" means
direct or indirect beneficial ownership of voting securities or other voting
interests representing at least 5% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 5% of the
outstanding equity securities or equity interests in a Person.
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"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.
"SELLER"--as defined in the first paragraph of this Agreement.
"SUBSIDIARY"--with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having such power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"SURVIVING CORPORATION"--the corporation that survives the
merger of Acquisition into the Company.
"TAX"--any tax (including any income tax, capital gains tax,
value added tax, sales tax, property tax, gift tax, or estate levy), levy,
assessment, tariff, duty, deficiency, or other fee in any related charge or
amount (including any fine, penalty, interest or addition to tax), imposed,
assessed or collected by or under the authority of any Governmental Body or
payable pursuant to any tax sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
"TAX RETURN"--any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection,
or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE"--a substantial likelihood of a Release
that may require action in order to prevent or mitigate damage to the
Environment that may result from such Release.
"THREATENED"--a claim, Proceeding, dispute, action, or other
matter will be deemed to have been "Threatened" if any demand or statement has
been made in writing or any notice has been given in writing that would lead a
prudent Person to conclude that such a claim, Proceeding,
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dispute, action, or other matter is likely to be asserted, commenced, taken,
or otherwise pursued in the future.
2. THE MERGER
2.1 THE MERGER
Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Company shall be merged with and into
Acquisition (the "Merger"). The separate existence and corporate organization of
the Company shall thereupon cease and the Company and Acquisition shall
thereupon be a single corporation. Acquisition shall be the surviving
corporation in the Merger (the "Surviving Corporation") and shall continue its
existence under the provisions of the Delaware General Corporation Law.
2.2 EFFECTIVE DATE OF THE MERGER
On the Closing Date, a certificate of merger (the "Articles of
Merger") shall be executed by the Company and Acquisition and shall be filed
with the Secretary of State of the States of Massachusetts and Delaware. The
Merger shall become effective at such time as the Articles of Merger are filed
with the Secretary of State of the States of Massachusetts and Delaware, such
time being hereinafter called the "Effective Time."
2.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Acquisition as in effect
immediately prior to the Effective Time shall be and remain the Articles of
Incorporation of the Surviving Corporation from and after the Effective Time
until amended as provided by law.
2.4 BY-LAWS
The By-Laws of Acquisition as in effect immediately prior to
the Effective Time shall be and remain the By-Laws of the Surviving Corporation
from and after the Effective Time until amended as provided by law.
2.5 DIRECTORS AND OFFICERS
Acquisition and Buyer shall, at Closing, cause ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇., Buyer appointment and ▇▇▇▇▇▇ ▇▇▇▇▇ to be appointed as directors of
the Surviving Corporation. ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. shall serve as
the officers of the Surviving Corporation until their successors have been
elected or appointed and shall have qualified in accordance with applicable law.
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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 ▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00
a.m. (local time).
2.7 CONVERSION OF COMPANY COMMON STOCK
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of any holder of capital stock of Buyer, Acquisition, the
Company or Seller: (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 1 share of capital stock of the Surviving Corporation and
shall represent all the issued and outstanding shares of the Surviving
Corporation; and (ii) the shares of the Company held by Seller shall be
converted into and shall become, without further action on the part of the
Seller, the right to receive seven and one-half (7.5) times the Company's EBITDA
based upon the adjusted EBITDA for the year ending December 31, 1997, as set
forth in Schedule 2.7(a) to this Agreement ("1997 Adjusted EBITDA"), less One
Hundred Eighty-Five Thousand Dollars ($185,000) for long-term debt. The
consideration shall consist of Two Million Dollars ($2,000,000) in cash (the
"Cash Consideration") and shares of restricted Common Stock of Buyer which
number of shares of Common Stock (the "Share Consideration") shall be determined
by dividing the amount set forth in the following sentence, less the Cash
Consideration, by Buyer's initial public offering price per share (the "IPO
Price"). The 1997 Adjusted EBITDA is Eight Hundred Ninety-One Thousand Dollars
($891,000), resulting in consideration of Six Million Four Hundred Ninety-Eight
Thousand Dollars ($6,498,000). The Purchase Price shall be adjusted, through an
adjustment to the Cash Consideration, (based on internal financial statements of
the Company reasonably acceptable to Buyer and Seller) (increased or decreased
as the case may be) by the difference between (i) total assets less total
liabilities (exclusive of goodwill) on the Closing Date as compared to (ii)
total assets less total liabilities (exclusive of goodwill) at December 31,
1997.
Seller shall receive shares of Common Stock of Buyer
in an amount equal to four and one-half (4.5) times the difference between 1998
EBITDA and 1997 Adjusted EBITDA in the event that the Company's 1998 EBITDA
equals or exceeds 1997 Adjusted EBITDA. The shares of Buyer's restricted Common
Stock shall be valued at the IPO Price. Buyer shall deposit in escrow shares of
Buyer's Common Stock (the "Escrowed Shares") having a value equal to One Million
Eight Hundred Thousand Dollars ($1,800,000) (provided that it is understood that
the number of Escrowed Shares shall not limit the number of shares of Common
Stock of Buyer that Seller may receive under this paragraph). The Escrowed
Shares shall be registered in Seller's name and held in escrow, pursuant to the
terms of an escrow agreement, the form and substance of which is attached as
Exhibit 2.7(b) hereto.
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(b) Within ninety (90) calendar days after December 31, 1998,
Buyer shall cause its independent auditing firm to deliver to the Seller a
report of adjusted EBITDA of the Company for the twelve (12) month period ended
December 31, 1998 (the "1998 EBITDA Certificate") which shall contain
adjustments to the Company's 1998 EBITDA in a manner consistent with Schedule
2.7(a).
(c) The Seller shall have a period of twenty (20) days after
delivery of the 1998 EBITDA Certificate, to present in writing to Buyer, any
objections that the Seller may have to any of the matters set forth in such
certificate, which objection shall be set forth in reasonable detail. If no
objections are raised within such twenty (20) day period, the certificate shall
be deemed accepted and approved by the Seller. If the Seller shall raise any
objections within the twenty (20) day period, the parties shall attempt to
resolve the matter or matters in dispute. If such dispute cannot be resolved
with a further period of twenty (20) days, the Seller shall have the right to
submit the dispute to a nationally recognized firm of independent public
accountants mutually agreed to by Seller and Buyer, which firm shall make a
final and binding determination as to such matter or matters in dispute. Each
party shall bear one-half of the fees and expenses in connection with such
review.
(d) Issuance of the shares of Buyer's common stock under
Section 2.7(b) shall be made no later than twenty-five (25) days after delivery
of the 1998 EBITDA Certificate if Seller raises no objection to such certificate
as provided in Section 2.7(c). If Seller raises an objection to the 1998 EBITDA
Certificate, then the issuance of such shares shall be made within seven (7)
days of the resolution of such dispute, provided, however, that the number of
Escrowed Shares not in dispute shall be immediately released to Buyer in
accordance with the provisions of this Section 2.7(d).
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and the Company hereby jointly and severally represent
and warrant to Buyer and Acquisition as follows:
3.1 ORGANIZATION AND GOOD STANDING
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
purports to own or use, and to perform all its material 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 the failure to so qualify would not have a Material
Adverse Effect.
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(b) Seller 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 Seller and the Company, enforceable against Seller and the Company
in accordance with its terms subject to bankruptcy, insolvency or other laws
affecting the rights of creditors generally. Upon the execution and delivery by
Seller of the Employment Agreement, the Employment Agreement will constitute the
legal, valid, and binding obligations of Seller enforceable against Seller in
accordance with its respective terms subject to bankruptcy, insolvency or other
laws affecting the rights of creditors generally. Seller and the Company have
the right, power, authority, and capacity to execute and deliver this Agreement
and to perform their obligations under this Agreement. The Seller and the
Company have approved this Agreement under applicable state corporate law
provisions.
(b) Except as disclosed in Section 3.2 to the Disclosure
Letter, neither the execution and delivery of this Agreement by Seller or the
Company nor the consummation or performance of any of the Contemplated
Transactions by the Seller or the Company will, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents of the Company,
or (B) any resolution adopted by the board of directors or the shareholders of
the Company;
(ii)result in a violation of any Legal Requirement
or any Order to which the Company or Seller, or any of the assets owned or used
by the Company, may be subject except where such violation or such material
remedy would not reasonably be expected to result in a Material Adverse Effect;
(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;
(iv) 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
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the material assets owned or used by
the Company.
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Except as set forth in Part 3.2 of the Disclosure Letter,
neither Seller 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) Seller is 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. Seller is an "accredited investor" as such term is
defined in Rule 501(a) under the Securities Act. Seller acknowledges 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 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.
Seller further acknowledges she shall be subject to such "lock-up" restriction
as may be imposed by the Buyer's underwriter or any entity regulating the
issuance of the Buyer's Common Stock in its initial public offering which
restriction shall not exceed the lesser of (a) one year from the date of Buyer's
initial public offering or (b) the shortest period of time any "founding dealer"
of Buyer is required to lock-up his or her shares of Buyer's Common Stock.
3.3 CAPITALIZATION
The authorized equity securities of the Company consist of
200,000 shares of common stock, $.01 par value, of which 25,000 shares are
issued and outstanding and constitute all the shares of the Company. The Seller
is, 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 except as
disclosed in the Disclosure Letter. 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.
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3.4 FINANCIAL STATEMENTS
Seller has delivered to Buyer audited consolidated balance
sheets of the Company as at December 31, 1996 and December 31, 1997 ("Balance
Sheet") and the related statements of income, and cash flow for each of the
fiscal years then ended. Such financial statements and notes fairly present in
all material respects the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the Company as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually run the aggregate, be materially adverse). No
financial statements of any Person other than the Company are required by GAAP
to be included in the financial statements.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are, complete and correct in all material respects and have been maintained in
accordance with sound business practices, including the maintenance of an
adequate system of internal controls. The minute books of the Company contain
accurate records of all meetings held of, and corporate action taken by, the
stockholders, the Board of Directors, and committees of the Board of Directors
of the Company. At the Closing, all of those books and records will be in the
possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES
Part 3.6 of the Disclosure Letter contains a complete and
accurate list of all real property, leaseholds, or other interests therein owned
by the Company. Seller has delivered or made available to Buyer copies of the
deeds and leases and other instruments by which the Company occupies or acquired
such real property and interests and such instruments are true, complete and
accurate. The Company owns (with good and marketable title in the case of real
property) or lease all the properties and assets (whether real, 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 (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
Balance Sheet, as the case may be, in the Ordinary Course of Business), and all
of the material properties and assets purchased or otherwise acquired by the
Company since the date of the Balance Sheet (except for personal property
acquired and sold since the date of the Balance Sheet in the Ordinary Course of
Business and consistent with past practice), which subsequently purchased or
acquired properties and assets (other than inventory and short-term investments)
are listed in Part 3.6 of the Disclosure Letter. All material properties and
assets reflected in the Balance Sheet are free and clear of all Encumbrances
except with respect to all such properties and assets, (a) mortgages or security
interests shown on the Balance Sheet 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
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default) exists, (b) mortgages or security interests incurred in connection with
the purchase of property or assets after the date of the 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, (c) liens for current taxes
not yet due, (d) liens imposed by law and incurred in the Ordinary Course of
Business for obligations not yet due and payable to landlords, carriers,
warehousemen, materialmen and the like, (e) unperfected purchase money security
interests existing in the Ordinary Course of Business without the execution of a
separate security agreement, and (f) with respect to real property, (i) minor
imperfections of title, if any, none of which is substantial in amount,
materially detracts from the value or impairs the use of the property subject
thereto, or impairs the operations of the Company, and (ii) zoning laws and
other land use restrictions that do not impair the present or anticipated use of
the property subject thereto.
3.7 CONDITION AND SUFFICIENCY OF ASSETS
The buildings, plants, structures, and equipment of the
Company are in good operating condition and repair, and adequate for the uses to
which they are being put, and none of such buildings, plants, structures, or
equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
3.8 ACCOUNTS RECEIVABLE
(a) All accounts receivable of the Company that are reflected
on the 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. The Company's reserves
for Accounts Receivable are calculated consistent with past practice and, in the
case of the reserve as of the Closing Date, will not represent a greater
percentage of the Accounts Receivable as of the Closing Date than the reserve
reflected in the Balance Sheet represented of the Accounts Receivable reflected
therein and will not represent a material adverse change in the composition of
such Accounts Receivable in terms of aging). 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 Balance Sheet, which list sets forth the aging of such Accounts
Receivable.
(b) Notwithstanding anything contained herein, as of December
31, 1997, the Balance Sheet reflected a reserve for uncollectible receivables of
Sixty Thousand Dollars ($60,000), Seller shall indemnify Buyer for any bad debt
expense in excess of such amount during the twelve (12) months ended December
31, 1998.
3.9 INVENTORY
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All inventory of the Company, whether or not reflected in the
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 $50,000. All inventories not
written off have been valued at the lower of cost (first in, first out). 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 the type required to be disclosed
as liabilities on a balance sheet reflected in accordance with GAAP except for
liabilities or obligations reflected or reserved against in the Balance Sheet
and current liabilities incurred in the Ordinary Course of Business since the
date thereof.
3.11 TAXES
(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 1993) all Tax Returns that are or were required to be
filed by or with respect to any of them pursuant to applicable Legal
Requirements. Seller has 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, 1993. 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 (determined in accordance with GAAP) have been provided in the
Balance Sheet.
(b) Except as set out in Part 3.11 of the Disclosure Schedule,
no United States federal income Tax Returns of the Company subject to such Taxes
have been audited by the IRS for taxable years from 1993 through 1997. Part 3.11
of the Disclosure Letter contains a complete and accurate list of any audits of
all such Tax Returns, including a reasonably detailed description of the nature
and outcome of each audit. All deficiencies proposed as a result of such audits
have been paid, reserved against, settled, or, as described in Part 3.11 of the
Disclosure Letter, are being contested in good faith by appropriate proceedings.
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,
1993, 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 have been determined in accordance with
GAAP. There exists no proposed tax assessment against the Company except as
disclosed in the Balance Sheet or in Part 3.11 of the
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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 Balance Sheet, there has not been any
material adverse change in the business, operations, properties, prospects,
assets, or condition of the Company, and, no event has occurred or circumstance
exists that would reasonably be expected to result in such a material adverse
change.
3.13 EMPLOYEE BENEFITS
Except for group medical insurance, associated life insurance
and a 401(k) Plan, 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) 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 except where such non-compliance would not reasonably be expected to
result in a Material Adverse Effect;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) in any material respect (A) would
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) would 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 except where such
violation, failure to
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comply or remedial action would not reasonably be expected to result in a
Material Adverse Effect; 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 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, and the Company has
been in full compliance with all of the terms and requirements of each
Governmental Authorization except as set forth in Part 3.14 of the Disclosure
Letter or as would not result in a Material Adverse Effect:
(i) no event has occurred or circumstance exists that
would reasonably be expected to (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 except where such
violation or failure to comply would not result in a Material Adverse Effect;
(ii) 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
(iii) all applications 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 material 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 except
where such non-filing would not have a Material Adverse Effect.
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
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lawfully conduct and operate its businesses in the manner currently conducted
and operated and to permit the Company to own and use its assets in the manner
in which it currently owns and uses such assets except where the failure to
obtain a Governmental Authorization would not result in a Material Adverse
Effect.
3.15 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the
Company that relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
To the Knowledge of Seller and the Company,
no such Proceeding as described above has been Threatened. Seller has delivered
or made available 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.
(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) Seller is not subject to any Order that relates
to the business of, or any of the assets owned or used by, the Company; and
(iii) no officer, director or key employee of the
Company is subject to any Order that prohibits such officer, director or key
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
and except as would not result in a Material Adverse Effect:
(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;
(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
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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 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;
(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 agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least
$100,000.
(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
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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 Seller has 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 $100,000;
(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 $100,000;
(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 $100,000;
(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 $100,000 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 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;
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(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 by or of the Company, 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 $10,000; 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:
(i) Seller (and no Related Person of the Seller) does not have
or may acquire any rights under, and Seller does 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 or key employee of the Company is
bound by any Contract that purports to limit the ability of such officer,
director or key employee to engage in or continue any conduct, activity, or
practice relating to the business of the Company.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract 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 subject to the enforceability of
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remedies to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws effecting the enforcement of creditors' rights generally from time
to time in effect.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times has been since
January 1, 1995, 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 except where such non-compliance would not have a
Material Adverse Effect;
(ii) to the Company's and the Seller's Knowledge,
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 except
where such non-compliance would not have a Material Adverse Effect;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) would 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 except where such
breach would not result in a Material Adverse Effect; 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 amounts paid or payable to the
Company under current or completed Applicable Contracts with any Person and, to
Seller's 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.
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3.18 INSURANCE
(a) Seller has 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 or has been covered at any time within the three
years preceding the date of this Agreement; 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, in each case with
responsible insurance companies, in such types and amounts and covering such
risks as are consistent with customary practices and standards of companies
engaged in business and operations similar to those of the Company and of
similar size. There has not been any claim under any such insurance policy
during the past three years that could reasonably be expected to have a material
adverse effect on the Company.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) Since January 1, 1995 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.
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(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 of a material nature that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS
Except as set forth in part 3.19 of the disclosure letter:
(a) To the Company's and the Seller's Knowledge, the Company
is, and at all times has been, in full compliance with, and has not been and is
not in violation of or liable under, any Environmental Law. Neither Seller or
the Company has received any actual or Threatened Order, notice, or other
communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, of any actual or potential violation or failure to comply with any
Environmental Law, 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 Seller 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
Seller, 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 Seller 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, to
the Knowledge of the Company or the Seller, any other properties and assets
(whether real, personal, or mixed) in which the Company has or had an interest.
(c) Neither Seller or the Company has received any citation,
directive, inquiry, notice, Order, summons, warning, or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets (whether real, personal, or mixed)
in which the Company had an interest, or with respect to any property or
facility to which Hazardous Materials generated, manufactured, refined,
transferred, imported, used, or processed by the Company have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(d) To the Company's and the Seller's Knowledge, the Company
has no Environmental, Health, and Safety Liabilities with respect to the
Facilities or with respect to any
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other properties and assets (whether real, personal, or mixed) in which the
Company (or any predecessor), has or had an interest.
(e) To the Company's and the Seller's 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.
(f) To the Company's and the Seller's Knowledge, there has
been no Release or 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) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Seller 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.
(h) To the Company's and the Seller's Knowledge, there are no
underground or above-ground storage tanks, incinerators or surface impoundments
at, on, or about under or within any real property operated or controlled, in
whole or in part by the Company.
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 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 officer or
director and any other Person ("Proprietary Rights Agreement") that materially
adversely affects or will affect (i) the performance of his duties as an officer
or director of the Company, or (ii) the ability of the Company to conduct its
business as presently conducted, including any Proprietary Rights Agreement with
Seller or the Company by any such officer or director. No director, officer, or,
to the Company's and the Seller's Knowledge, other key employee of the Company
presently intends to terminate his employment with the Company.
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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 Seller's Knowledge there is not threatened, (a) any
strike, slowdown, picketing, work stoppage, or employee grievance process, (b)
except as disclosed in Section 3.21 of the Disclosure Letter, 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. No event has occurred or
circumstance exists that could reasonably 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 material respects with all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing. 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, other than the
common trade law names, the common law trade names listed on 3.22 of the
Disclosure Letter.
(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
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
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(a) No representation or warranty of Seller 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.
3.25 RELATIONSHIPS WITH RELATED PERSONS
Except as stated in the Disclosure Letter, neither Seller or
any Related Person of Seller 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 Seller or any Related Person of
Seller 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 Seller or any Related Person of Seller 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
Seller, 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 Seller as follows:
4.1 ORGANIZATION; POWER; QUALIFICATION
Acquisition will at the Closing Date be a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Acquisition and Buyer
has the corporate power and authority to own or lease and operate its properties
to carry on its business as now being conducted, and is duly qualified and in
good standing and authorized to do business as a foreign corporation in each
jurisdiction in which the character of its properties or the nature of its
business requires 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.
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4.2 AUTHORITY
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 Seller 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
Buyer and Acquisition and their officers and agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement and will indemnify and hold the Company and Seller harmless from
any such payment alleged to be due by or through Buyer or Acquisition as a
result of the action of Buyer and Acquisition or their officers or agents.
4.7 AUTHORITY
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This Agreement constitutes the legal, valid and binding
obligations of Acquisition and Buyer, enforceable against Acquisition and Buyer
in accordance with its terms, subject to bankruptcy, insolvency or other loss
affecting the rights of creditors generally. Buyer and Acquisition have the
right, power and corporate authority and capacity to execute and deliver this
Agreement and perform their obligations under this Agreement.
Neither the execution and delivery of this Agreement by
Acquisition or Buyer nor the consummation of performance of any contemplated
transactions by Buyer or Acquisition will, (with or without notice or lapse of
time) (i) contravene, conflict with, result in any violation of (A) any
provision of the organizational documents of the Buyer or Acquisition, or (B)
any resolutions adopted by the Board of Directors of Buyer or Acquisition; (ii)
contravene, conflict with or result in the violation of material 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 Buyer or Acquisition or otherwise relates to the business of, or any
of the assets owned or used by Buyer or Acquisition, as the case may be.
4.8 DISCLOSURES
Buyer has delivered to Seller disclosure information
concerning Buyer and its proposed operations, its management, its proposed IPO
(the "Disclosure Document"). All of the information contained in such Disclosure
Document is true and correct in all material respects in light of the
circumstances when made.
5. COVENANTS OF SELLER AND THE COMPANY PRIOR TO CLOSING
DATE
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date,
Seller 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,
Seller will cause the Company to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
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(b) preserve intact the current business organization of the
Company, and use its reasonable best efforts to 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.
5.3 NEGATIVE COVENANT
Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Seller 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, provided, however, that the Company shall be permitted
to pay bonuses in the ordinary course of business and consistent with the past
practice subject to the achievement of documented milestones. Such bonuses are
not to exceed Fifty Thousand Dollars ($50,000) over the twelve (12) month period
ending December 31, 1998.
5.4 REQUIRED APPROVALS
As promptly as practicable after the date of this Agreement,
Seller 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, Seller
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.
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5.5 NOTIFICATION
Seller or the Company may update or supplement the Disclosure
Letter in writing delivered to Buyer at any time on or prior to the Closing to
reflect matters which occur subsequent to the date of this Agreement. Buyer, in
its sole discretion, may (i) accept such Disclosure Letter as modified and
consummate the transactions contemplated by this Agreement, thereby waiving any
claim that Buyer may have that such modification is a breach of the
representations and warranties given in Section 3 on the date of this Agreement,
or (ii) terminate this Agreement whereupon all further obligations of the
parties hereunder will terminate and there shall be no liability on the part of
any party or its respective directors, officers or shareholders, except in any
such case in accordance with the expenses provisions of Section 11.1 and the
mutual confidentiality obligations contained in this Agreement and in such other
mutual confidentiality agreement entered into between Buyer and the Company,
which shall survive any such termination.
5.6 NO NEGOTIATION
Until such time, if any, as this Agreement is terminated
pursuant to Section 9, Seller 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. Seller 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,
Seller 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 Seller in writing if Buyer becomes aware of any fact or
condition that causes or constitutes a Breach of any of Buyer's or Acquisition's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement or any fact or
condition that would, except as expressly contemplated by this Agreement, cause
or constitute a Breach of any such representation or warranty.
6.2 BEST EFFORTS
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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 Seller's 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 SELLER'S PERFORMANCE
(a) All of the covenants and obligations that Seller 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 ▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇") in the
form of Exhibit 7.2(b)(i) (the "Employment Agreements") executed by ▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, respectively; and (ii) the certificate executed by Seller and an
officer of the Company representing to Buyer and Acquisition that Seller's 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.
7.3 CONSENTS
Each of the consents identified in the Disclosure Letter, must
have been obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS
Each of the following documents must have been delivered to
Buyer:
(a) an opinion of ▇▇▇▇▇, ▇▇▇▇ and ▇'▇▇▇▇▇▇▇▇, P.C., dated the
Closing Date, reasonably acceptable to Buyer;
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(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
Seller's and the Company's representations and warranties, (iii) evidencing the
performance by Seller, the Company, or the compliance by Seller 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 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.
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7.10 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
8. CONDITIONS PRECEDENT TO SELLER'S AND THE COMPANY'S
OBLIGATION TO CLOSE
Seller's and the Company's obligations to consummate the
Merger and to take the other actions required to be taken by Seller 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
Seller 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
Agreements (ii) a certificate executed by an officer of Buyer representing to
Seller 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
Buyer and Acquisition must have caused the following documents
to be delivered to Seller:
(a) an opinion of Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, P.A., dated
the Closing Date, reasonably acceptable to Buyer and Seller; and
(b) such other documents as Seller or its counsel may
reasonably request for the purpose of (i) enabling its counsel to provide the
opinion referred to in Section 7.3(a), (ii) evidencing the accuracy of any
representation or warranty of Buyer or Acquisition, (iii) evidencing the
performance by Buyer or Acquisition of, or the compliance by Buyer or
Acquisition with, any covenant or obligation required to be performed or
complied with by Buyer or Acquisition,
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(iv) evidencing the satisfaction of any condition referred to in this Section 7,
or (v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
8.4 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.
8.5 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.
8.6 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.
8.7 NO INJUNCTION
No preliminary or permanent injunction or other order by any
federal or state court preventing or consummation of the transactions
contemplated in this Agreement has been issued and continues in effect, and this
Agreement and the transactions contemplated hereby are not prohibited under any
applicable federal or state law or regulation.
8.8 INITIAL PUBLIC OFFERING
Buyer shall have completed its initial public offering.
9. TERMINATION
9.1 TERMINATION EVENTS
This Agreement may, by notice given prior to or at the
Closing, be terminated:
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(a) by either Buyer and Acquisition or Seller 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 Seller 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 Seller and the Company to comply with their
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date;
(c) by mutual consent of Buyer and Acquisition and Seller and
the Company; or
(d) by either Buyer and Acquisition or Seller and the Company
if the Closing has not occurred (other than through the failure of any party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before September 30, 1998, or such later date as the
parties may agree upon.
A party's right of termination under Section 9.1 is in
addition to any other rights it may have under this Agreement or otherwise, the
exercise of a right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
parties under this Agreement terminate, except the obligations in Section 11.1
and 11.3 will survive; provided, however, that if this Agreement is terminated
by a party because of a breach of the Agreement by the other party or because
one or more of the conditions to the terminating party's obligations is not
satisfied as a result of the other party's failure to comply with its
obligations under this Agreement, the terminating party's right to pursue all
legal remedies will survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 SURVIVAL
All representations, warranties, covenants, and obligations in
this Agreement, the Disclosure Letter and any of the supplements thereto, and
any other certificate or document delivered pursuant to this Agreement will
survive the Closing until the one (1) year from the Closing except for the
representations and warranties in Section 3.3, which shall survive for eighteen
(18) months from the Closing.
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10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER
Seller will indemnify and hold harmless Buyer, Acquisition,
the Surviving Corporation, and their respective 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)
(collectively, "Damages"), arising from or in connection with:
(a) any Breach of any representation or warranty made by
Seller in this Agreement, without giving effect to any supplement to Disclosure
Letter with respect to matters occurring before the date of this Agreement,
provided that information in any supplement to the Disclosure Letter shall not
constitute a Breach if the Contemplated Transactions are consummated or any
other certificate or document delivered by Seller pursuant to this Agreement;
(b) any Breach by Seller or the Company of any covenant or
obligation of Seller or the Company in this Agreement;
(c) any product shipped or any services provided by Company
prior to the Closing Date (other than returns in the ordinary course of
business);
(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 Seller or the Company (or any
Person acting on their behalf) in connection with any of the Contemplated
Transactions;
(e) any matter disclosed in Part 3.15 of the Disclosure
Letter, including legal fees and related expenses associated with such matters,
provided, however, Seller shall not be liable for indemnification for Damages
for legal fees and related expenses (with respect to the matters set forth in
this Section 10.2(e)) unless and only to the extent that such amounts exceed
Forty Thousand Dollars ($40,000.00); and
(f) any claim for matters referred to in Section 3.8(b).
The remedies provided in this Section 10.2 shall be the sole
and exclusive remedy available to Buyer or the other Indemnified Persons under
this Agreement. Damages indemnified hereunder shall be reduced to the extent
Buyer or the Company receives compensation from its insurance coverage for such
Damages, provided, however, that Buyer or the Company shall not be obligated to
seek recovery from its insurance coverage for such Damages.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Buyer will indemnify and hold harmless Seller for, and will
pay to the Seller the amount of, any loss, liability, claim, damage, expense
(including costs of investigation and defense
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and reasonable attorneys' and other professional fees) (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.
The remedies provided in this Section 10.3 shall be the
exclusive remedy that may be available to Seller.
10.4 TIME LIMITATIONS
If the Closing occurs, Seller will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in Section 3.3, unless on or before one (1) year from the
date of Closing, Buyer notifies Seller of a claim specifying the factual basis
of that claim. With respect to the claim under Section 3.3, Seller will have no
liability unless on or before eighteen (18) months from the date of Closing,
Buyer notified Seller 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 one (1) year from the date of Closing, Seller notifies
Buyer of claims specifying the factual basis of that claim.
10.5 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under
Sections 10.2 or 10.3 of notice of the commencement of any Proceeding against
it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to
any indemnified party, except to the extent that the indemnifying party
demonstrates that the defense of such action is prejudiced by the indemnified
party's failure to give such notice.
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(b) If any Proceeding referred to in Section 10.5(a) is
brought against an indemnified party and it gives notice, unless the claim
involves Taxes, to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will be entitled to participate in such
Proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such Proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), to assume the defense of such Proceeding with
counsel reasonably 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) 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 (ii) 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 MONETARY LIMITATIONS ON INDEMNIFICATION
Notwithstanding any other provisions of this Agreement, (i) no
party shall be entitled to indemnification for Damages, arising out of any
matter referred to in Sections 10.2 and 10.3 above, as applicable, unless and
only to the extent that such Damages, exceed Seventy-Five Thousand Dollars
($75,000) provided, however, that such limitation shall not apply to claims for
matters set forth in Section 10.2(e) and (f); (ii) in no event shall the
aggregate liability of Seller arising out of the matters referred to in Section
10.2 exceed the initial Share Consideration received by Seller upon closing of
the merger based upon the 1997 Adjusted EBITDA.
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Seller, at her sole discretion, may satisfy any claim for
Damages by delivery of cash or shares of Buyer's Common Stock. For the purposes
of this Section, the shares of Buyer's Common Stock shall be valued at the
greater of (i) the Fair Market Value of Buyer's Common Stock based upon the
average thirty (30) day trading price of such stock for the thirty (30) day
period ending five (5) trading days prior to the final determination of the
amount of any claim or (ii) the initial public offering price per share.
11. GENERAL PROVISIONS
11.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each
party to this Agreement will bear its respective expenses incurred in connection
with the preparation, execution, and performance of this Agreement and the
Contemplated Transactions, including all fees and expenses of agents,
representatives, counsel, and accountants, Buyer shall pay the fees and expenses
of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇.
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 Seller 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. Seller 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 Seller 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 Seller, or the Company in connection with its initial
public offering and any related obligations therewith.
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(b) If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
11.4 NOTICES
All notices, consents, waivers, and other communications under
this Agreement must be in writing and will be deemed to have been duly given
when (a) delivered by hand, (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by 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):
Seller: New England Office Supply Company
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇, ▇▇▇▇ & ▇'▇▇▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Buyer or Acquisition: Office Center Corporation
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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.
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11.6 WAIVER
The rights and remedies of the parties to this Agreement are
cumulative and not alternative. Neither the failure nor any delay by any party
in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this
Agreement without the prior consent of the other parties. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the heirs, successors and permitted assigns of
the parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the parties to this Agreement any legal
or equitable right, remedy, or claim under or with respect to this Agreement or
any provision of this Agreement. This Agreement and all of its provisions and
conditions are for the sole and exclusive benefit of the parties to this
Agreement and their heirs, successors and assigns.
11.9 SEVERABILITY
If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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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.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: SELLER:
OFFICE CENTRE CORPORATION
By:/s/ ▇.▇. ▇▇▇▇▇▇, ▇▇. /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------- --------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Sole Director/Owner
ACQUISITION:
OFFICE CENTRE NEW ENGLAND
By: /s/ ▇.▇. ▇▇▇▇▇▇, ▇▇.
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title:
COMPANY:
NEW ENGLAND OFFICE SUPPLY
COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
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NEW ENGLAND OFFICE SUPPLY COMPANY
LIST OF DISCLOSURE SCHEDULES AND EXHIBITS
EXHIBITS
--------
Exhibit 7.2(b)(i) Employment Agreements
Exhibit 8.3(a) Opinion of Atlas, ▇▇▇▇▇▇▇▇, Trop & Borkson,
P.A. (not there)
SCHEDULES
---------
Schedule 3.2 Authority; No conflict
Schedule 3.6 Real Property
Schedule 3.8 Accounts Receivable
Schedule 3.11 Taxes
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; No defaults
Schedule 3.18 Insurance
Schedule 3.20 List of Employees
Schedule 3.21 See section 3.15
The Company agrees to furnish supplementally a copy of any
omitted schedule to the Securities Exchange Commission upon request.
