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CONFORMED COPY
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 9, 1996
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Unidigital Inc.
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(Exact Name of Registrant as Specified in Charter)
Delaware 0-27664 13-3856672
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(State or Other (Commission File Number) (IRS Employer Identification No.)
Jurisdiction
of Incorporation)
20 West 20th Street, New York, New York 10011
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(Address of Principal Executive Offices) (zip code)
(212) 337-0330
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(Registrant's telephone
number, including area
code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OF ASSETS
On August 9, 1996, Unidigital Inc. (the "Company"), through a wholly-
owned subsidiary, consummated the acquisition of certain assets of Cardinal
Communications Group, Inc. ("Cardinal") and C-Max Graphics, Inc. ("C-Max"; C-
Max and Cardinal are referred to collectively as the "Seller") located in New
York City. The Seller provided prepress and digital print services to
advertising agencies, publishers and corporations in the New York City and
surrounding area. The Company intends to continue such line of business. The
assets purchased included the Seller's entire customer list, inventory,
equipment, trade name and 34,000 square feet of commercial real estate in New
York City. The purchase price included cash payments of $1,450,000, issuance
of $250,000 of restricted Common Stock of the Company (39,216 shares) and the
assumption of equipment lease obligations and real estate taxes and mortgages.
The Company funded the purchase price from proceeds of a $1,400,000 line of
credit from Chase Manhattan Bank. In determining the purchase price, the
Company considered, among other factors, the past and projected revenues
generated from the customers of the Seller and the value of the acquired
inventory, equipment and real estate.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Information of Business Acquired.
To be filed by amendment. The Company believes that it is impracticable
to provide such financial information as of the date hereof. Such information
shall be filed with the Commission no later than October 23, 1996.
(b) Pro Forma Financial Information (unaudited).
To be filed by amendment. The Company believes that it is impracticable
to provide such financial information as of the date hereof. Such information
shall be filed with the Commission no later than October 23, 1996.
(c) Exhibits.
Exhibit No. Description of Exhibit
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10.1 Asset Purchase Agreement dated as of
August 2, 1996 by and among Unidigital
Inc., Unidigital/Cardinal Corporation,
Cardinal Communications Group, Inc., C-Max
Graphics, Inc. (Cardinal and C-Max being
referred to herein collectively as the
"Seller"), and each of Mark and Sheldon
Darlow, the sole shareholders of the
Seller.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Unidigital Inc.
By: /s/Kevin H. Rich
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Kevin H. Rich, Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 19, 1996
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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
Agreement made as of the 2nd day of August, 1996 by and among Unidigital
Inc., a Delaware corporation with its principal office at 20 West 20th Street,
New York, New York 10011 ("Unidigital"), its wholly-owned subsidiary,
Unidigital/Cardinal Corporation, a Delaware corporation with its principal
office at c/o Unidigital Inc., 20 West 20th Street, New York, New York 10011
(the "Buyer"), Cardinal Communications Group, Inc., a New York corporation
with its principal office at 545 West 45th Street, New York, New York 10036
("Cardinal"), and its affiliate, C-Max Graphics, Inc., a New York corporation
with its principal office at 545 West 45th Street, New York, New York 10036
("C-Max") (Cardinal and C-Max being referred to herein collectively as the
"Seller"), and Mark and Sheldon Darlow, the sole shareholders of the Seller
(the "Shareholders"). The Seller and the Shareholders are sometimes
collectively referred to herein as the "Selling Parties".
Preliminary Statement
The Seller is engaged principally in the business of typesetting, digital
photography, prepress, printing and indigo at its New York facility (the
"Business"). The Buyer desires to purchase, and the Seller desires to sell,
certain of the assets and the Business of the Seller, for the consideration
set forth below and the assumption of certain of the Seller's liabilities set
forth below, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereby agree as follows:
1. Sale and Delivery of the Assets
1.1 Delivery of the Assets
(a) Subject to and upon the terms and conditions of this Agreement,
except as specifically provided in Section l.l(b) hereof, at the closing of
the transactions contemplated by this Agreement (the "Closing"), the Seller
shall sell, transfer, convey, assign and deliver to the Buyer, and the Buyer
shall purchase from the Seller, free and clear of all liens, liabilities,
security interests, leasehold interests and encumbrances of any nature
whatsoever (except as otherwise expressly provided herein), all of the
properties, assets and other claims, rights and interests of the Seller or
which are used in the Business of whatever kind, character or description,
whether real, personal or mixed, tangible or intangible, wherever situated,
including without limitation:
(i) all inventories of raw materials, work in process,
goods in transit (i.e., inventories purchased by, but
not delivered to, the Seller), finished goods, office
supplies, maintenance supplies, packaging materials,
spare parts and similar items (collectively, the
"Inventory");
(ii) those prepaid expenses set forth in Schedule 1.1(ii);
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(iii) all rights under the contracts, agreements, leases
(including equipment leases), licenses, purchase
orders, customer sales agreements and other instruments
set forth on Schedule 2.9(b) and Schedule 2.11(b)
attached hereto (collectively, the "Contract Rights");
(iv) all real estate set forth on Schedule 2.20, together
with all buildings, fixtures and improvements located
on or attached thereto, including the Seller's right,
title and interest in and to all leases, subleases,
franchises, licenses and permits (to the extent
transferable), easements, and rights-of-way which are
appurtenant to said real estate (collectively, the
"Real Estate");
(v) all books; payment records; accounts; customer lists;
environmental reports or studies; correspondence;
production records; technical, accounting,
manufacturing and procedural manuals; engineering data;
development and design data; plans, blueprints,
specifications and drawings; employment and personnel
records; and other useful business records, including
electronic media, and any confidential or other
information which has been reduced to writing, utilized
in the conduct of or relating to the Business or the
Assets (as hereinafter defined), subject to the
Seller's right to retain copies thereof which the
Seller reasonably requires for its ongoing operation,
winding-up or dissolution;
(vi) all rights of the Seller under express or implied
warranties from the suppliers of the Assets to the
extent transferable (but excluding such rights insofar
as the same pertain to liabilities retained by the
Seller hereunder);
(vii) the motor vehicles and other rolling stock listed on
Schedule 1.1(vii);
(viii) all of the machinery, equipment, tools, dies, tooling,
production fixtures, maintenance machinery and
equipment, computers, telecommunication systems,
fittings and other office equipment, furniture,
leasehold improvements and construction in progress on
the Closing Date whether or not reflected as capital
assets in the accounting records of the Seller which
are owned by the Seller and used or useful in the
Business including but not limited to all of the
foregoing located at the locations set forth on
Schedule 1.l(viii) (collectively, the "Fixed Assets");
(ix) all right, title and interest of Seller in and to all
intangible property rights relating to the Business,
including but not limited to inventions, discoveries,
trade secrets, processes, formulas, know-how, United
States and foreign patents, patent applications,
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trade names, including but not limited to the name
"Cardinal Communications Group, Inc.", or any
derivation thereof and those names listed on Schedule
2.18 attached hereto, trademarks, trademark
registrations, applications for trademark
registrations, copyrights, copyright registrations,
certification marks, industrial designs, technical
expertise, research data and other similar property and
the registrations and applications for registration
thereof owned by the Seller or, where not owned, used
by the Seller in the Business and all goodwill
associated thereto and all licenses and other
agreements to which the Seller is a party (as licensor
or licensee) or by which the Seller is bound relating
to any of the foregoing kinds of property or rights to
any "know-how" or disclosure or use of ideas
(collectively, the "Intangible Property");
(x) all transferable approvals, authorizations,
certifications, consents, variances, permissions,
licenses and permits to or from, or filings, notices or
recordings to or with, federal, state, foreign, and
local governmental authorities as held or effected by
the Seller in connection with the Assets;
(xi) all of the Seller's goodwill and the exclusive right to
use the names of the Seller as all or part of a
corporate name; and
(xii) except as specifically provided in Section 1.1(b)
hereof, all other assets, properties, claims, rights
and interests of the Seller which relate to the
Business and exist on the Closing Date, of every kind
and nature and description, whether tangible or
intangible, real, personal or mixed.
(b) Notwithstanding the provisions of Section 1.1(a) above, the
assets to be transferred to the Buyer under this Agreement shall not include
(i) any of Seller's rights or consideration under this Agreement, or (ii) all
accounts receivable and notes receivable as of the date hereof (including any
security held by the Seller for the payment thereof) (collectively, the
"Accounts Receivable"), or (iii) any refunds of federal, state, foreign or
local income or other tax paid by the Seller, or (iv) any insurance policies
currently held by the Seller and related premium agreements for general
liability, product liability and workers compensation insurance for periods
prior to the Closing Date, or (v) any of Seller's claims or rights existing
as of the date hereof against Republic National Bank ("RNB"), Katz Digital
Technologies, Inc. and the Shareholders or (vi) those assets listed on
Schedule 1.1(b) attached hereto (collectively, the "Excluded Assets"). If any
assets of the type enumerated in clauses (viii) and (ix) of Section 1.1(a)
hereof are used both in the Business as well as in any other business of the
Seller as of or immediately prior to the date hereof, such assets shall
constitute Fixed Assets or Intangible Property (as the case may be) for
purposes of this Agreement unless otherwise set forth in Schedule 1.1(b) made
a part hereof.
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(c) The Inventory, Contract Rights, Real Estate, Fixed Assets,
Intangible Property and other properties, assets and business of the Seller
described in Section 1.1(a) above, other than the Excluded Assets, shall be
referred to collectively as the "Assets".
1.2 Further Assurances.
(a) At the Closing, the Seller shall execute and deliver a Bill of
Sale (the "Bill of Sale") substantially in the form attached hereto as Exhibit
A, and the assignments described in Sections 7.16(b), (c), (d) and (e) hereof.
At any time and from time to time after the Closing, at the Buyer's request
and without further consideration, the Selling Parties (or their successors)
promptly shall execute and deliver such assignments of leases and other
instruments of sale, transfer, conveyance, assignment and confirmation, and
take such other action, as the Buyer may reasonably request to more
effectively transfer, convey and assign to the Buyer, and to confirm the
Buyer's title to, all of the Assets and the Business, to put the Buyer in
actual possession and operating control thereof, to assist Buyer in exercising
all rights with respect thereto and to carry out the purpose and intent of
this Agreement.
(b) The Selling Parties and the Buyer each will use its best
efforts to obtain as promptly as possible written consents to the transfer,
assignment or sublicense to the Buyer of all agreements, commitments, purchase
orders, contracts, licenses, leases, rights and other contract documents being
transferred pursuant to Section 1.1(a) hereof where the approval or other
consent of any other person is required. If any such approval or consent
cannot be obtained, or if the parties hereafter agree in writing that it is
not in their respective best interests to obtain any such approval or other
consent, the Selling Parties will cooperate with the Buyer in any reasonable
arrangement designed to provide the Buyer with substantially the same economic
benefits as if such approval or other consent had been obtained and the
transfer effected on or before the Closing Date.
1.3 Assumption of Liabilities.
(a) At the Closing, the Buyer shall execute and deliver an
Instrument of Assumption of Liabilities (the "Instrument of Assumption")
substantially in the form attached hereto as Exhibit B, pursuant to which it
shall assume and agree to (i) perform, pay and discharge all those accrued
expenses and withholdings as reflected in the accounts set forth on Schedule
1.3(a) attached hereto (excluding bonuses and any other monies due and owing
the Selling Shareholders unless mutually agreed to by the Buyer and the
Selling Parties prior to the Closing) which were incurred in the ordinary
course of business of the Business and are outstanding on the Closing Date,
not to exceed: (A) in the case of equipment leases, $150,000, and (B) in the
case of real estate taxes, $40,000, unless otherwise agreed by the Buyer (the
obligations set forth in (i) are collectively, the "Assumed Current
Liabilities"); (ii) perform in accordance with their terms those obligations
outstanding on the Closing Date under the Contract Rights; (iii) perform in
accordance with their terms those liabilities arising after the Closing Date
from any agreement, contract, commitment or other contract documents which the
Buyer has requested be transferred to it pursuant to Section 1.1(a) but which
has not been so transferred due to the failure of Seller to obtain the consent
or approval required for such transfer, provided that the Buyer has received
substantially the same economic benefit of such contract as if such consent or
approval had been obtained; (iv) perform in accordance with their terms those
obligations owing to the Business Loan Center under that certain
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mortgage secured by the entire ninth floor in the building located at 545 West
45th Street, New York, New York 10036; and (v) perform in accordance with
their terms those obligations owing RNB under that certain Loan Agreement,
dated as of May 27, 1986 (Mortgage) and January 19, 1995 (Note) (collectively,
the "Loan Agreement"), between the Seller and RNB, if the Seller shall not
have made adequate provisions for the payment in full (and termination) by
Seller of such facility (the obligations set forth in (i), (ii), (iii), (iv)
and (v) are, collectively, the "Assumed Liabilities"). Except as otherwise
provided herein, the parties hereto understand and agree that to the extent
the outstanding balance owed to RNB under the Loan Agreement is less than
$1,400,000, the Buyer, shall pay such amount to Seller's other creditors.
(b) Except as otherwise provided herein, the Buyer shall not assume
any of the liabilities of the Selling Parties and shall purchase the Assets
free and clear of all liens, mortgages, security interests, encumbrances and
claims and the Selling Parties each represent, warrant and agree that the
Buyer shall not be or become liable for any claims, demands, liabilities or
obligations not expressly assumed in this Agreement of any kind whatsoever
arising out of or relating to the conduct of the Business by Seller or the
Assets or Assumed Liabilities prior to the Closing Date. Without limiting the
foregoing, the Buyer shall not at the Closing assume or agree to perform, pay
or discharge, and the Selling Parties shall remain unconditionally liable for,
all obligations, liabilities and commitments, fixed or contingent, of the
Selling Parties other than the Assumed Liabilities, including but not limited
to:
(i) except as set forth in Section 5A hereof, severance,
termination or other payments or benefits (including
but not limited to post-retirement benefits) including
but not limited to those owing under Seller's severance
policy or any employment agreement to any employees
(union or non-union), sales agents or independent
contractors employed by the Seller prior to the Closing
(collectively, "Seller's Employees"), liabilities
arising under any federal, state, local or foreign
"plant closing law", liabilities accruing under the
Seller's employee benefit plans, vacation pay plans or
programs, retirement plans, and liabilities for any
Employee Plan (as defined in Section 2.19 except those
liabilities to Seller's Employees who become employees
of Buyer after the Closing relating solely to and
arising solely out of their term of employment with the
Buyer);
(ii) worker's compensation claims arising from events prior
to Closing;
(iii) stock option or other stock-based awards made to
Seller's Employees,
(iv) liabilities for any federal, state, local or foreign
income taxes (including interest, penalties and
additions to such taxes) or any deferred income taxes
of the Selling Parties;
(v) liabilities for any payroll taxes (including interest,
penalties and additions to such taxes), except those
liabilities to Seller's
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Employees who become employees of the Buyer after the
Closing relating solely to and arising solely out of
their term of employment with the Buyer;
(vi) liabilities incurred for violations of occupational
safety, wage, health, welfare, employee benefit or
environmental laws or regulations prior to the Closing
Date;
(vii) liabilities to the extent related solely to the
Excluded Assets;
(viii) except as provided in Section 12 hereof, or any tax
(including but not limited to any federal, state, local
or foreign income, franchise, single business, value
added, excise, customs, intangible, sales, transfer,
recording, documentary or other tax) imposed upon, or
incurred by, the Selling Parties, if any, in connection
with or related to this Agreement or the transactions
contemplated hereby (including interest, penalties and
additions to such taxes);
(ix) liabilities for any trade accounts payable to the
extent accrued but not paid prior to the Closing Date
(the "Accounts Payable");
(x) other than the Assumed Liabilities, any liabilities of
Seller to third parties arising out of the failure of
Seller to obtain any necessary consents to the
assignment to Buyer of contracts or leases to which
Seller is a party (including damages asserted by third
parties for breach of such contracts or leases due to
the failure to obtain such consents);
(xi) liabilities which are undisclosed or contingent;
(xii) liabilities for borrowed money or liabilities, other
than the Assumed Liabilities, to creditors of the
Selling Parties;
(xiii) liabilities of Seller for any state franchise taxes or
annual license or other fees relating to qualification
as a foreign corporation or authorization to do
business in such states (including interest, penalties
and additions to such taxes and fees);
(xiv) any other liabilities of any kind or nature whether now
in existence or arising hereafter not expressly assumed
by Buyer under Section 1.3(a) hereof.
1.4 Purchase Price. In consideration of the transfer of the Business
and Assets of the Seller to the Buyer hereunder, the Buyer will assume the
Assumed Liabilities and will pay the Seller an aggregate purchase price (the
"Purchase Price"), subject to the provisions of Section 1.5 hereof, equal to
the sum of (i) $250,000, such amount to be paid by the issuance of such number
of shares of Unidigital common stock (the "Unidigital Stock"), which when
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multiplied by the average daily bid and asked prices of Unidigital's stock for
the 10 days immediately prior to Closing, shall have a market value of
$250,000 (such aggregate amount of consideration paid in stock in accordance
with the provisions of Section 1.4(i) hereof being referred to herein as the
"Stock Consideration") plus (ii) $50,000 in cash (such aggregate amount of
consideration to be paid in cash in accordance with the provisions of Section
1.4(ii) hereof being referred to herein as "Cash Consideration").
1.5 The Closing.
(a) The Closing shall take place at the offices of Buchanan
Ingersoll, 500 College Road East, Princeton, New Jersey 08540 on or before
August 9, 1996 (the "Closing Date"). The transfer of the Assets by the Seller
to the Buyer shall be deemed to occur on the Closing Date.
(b) At the Closing, the Buyer shall pay the Purchase Price in the
following manner:
(i) by the assumption of the Assumed Liabilities; and
(ii) by tender in payment of the Purchase Price as follows:
The Buyer shall pay the Stock Consideration to a
third-party escrow agent, reasonably acceptable to the
Seller and the Buyer, as "Escrow Agent" pursuant to the
Escrow Agreement in the form of Exhibit C hereto (the
"Escrow Agreement"), by wire transfer to the account
specified in the Escrow Agreement. The disbursement of
amounts held by the Escrow Agent shall be done in
accordance with the terms of the Escrow Agreement. The
Buyer shall pay the Cash Consideration to the
Shareholders by a certified bank check.
1.6 Allocation of Purchase Price. The aggregate amount of the Purchase
Price shall, for tax purposes only, be allocated among the Assets and Assumed
Liabilities substantially in accordance with the amounts set forth on Schedule
1.6. The Seller and the Buyer agree that they will not take any position which
is materially inconsistent with the allocations provided for in this Agreement
in preparing income, capital or franchise tax returns.
2. Representations of the Selling Parties
The representations and warranties made by the Selling Parties
herein or in any instrument or document furnished in connection herewith shall
survive the Closing until (and including) the fifth anniversary of the Closing
Date. The representations and warranties in this Section 2 or in any document
delivered to the Buyer pursuant to this Agreement are deemed to be material
and the Buyer is entering into this Agreement relying on such representations
and warranties. The Selling Parties, jointly and severally, represent and
warrant to the Buyer as follows (it being understood that all references in
this Section 2 to the Seller shall be deemed to include any of Seller's
subsidiaries, unless the context otherwise requires):
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2.1 Organization. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation, and has all requisite power and authority (corporate and other)
to own its properties, to carry on its business as now being conducted, to
execute and deliver this Agreement and the agreements contemplated herein, and
to consummate the transactions contemplated hereby. Schedule 2.1 sets forth
the authorized and outstanding capital stock of the Seller as well as the
record and beneficial owners thereof. The Seller does not own or control,
directly or indirectly, any corporation, partnership, association or business
entity. The Seller is duly qualified to do business and in good standing in
all jurisdictions in which its ownership of property or the character of its
business requires such qualification. Schedule 2.1 contains a true, correct
and complete list of all of the jurisdictions in which the ownership of the
property used in the Business or the nature of the Business requires
qualification.
2.2 Authorization. The execution and delivery of this Agreement (and
all other agreements provided for herein) by the Seller, and the consummation
by the Seller of all transactions contemplated hereby, has been duly
authorized by all requisite corporate and shareholder action. This Agreement
and all such other agreements and obligations entered into and undertaken in
connection with the transactions contemplated hereby to which the Seller is a
party constitutes the valid and legally binding obligations of the Seller,
enforceable against it, in accordance with their respective terms except as
such enforceability may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally. The execution,
delivery and performance by the Seller of this Agreement and the agreements
provided for herein, and the consummation by the Buyer of the transactions
contemplated hereby and thereby, will not, with or without the giving of
notice or the passage of time or both, (a) violate the provisions of any law,
rule or regulation applicable to the Seller; (b) violate the provisions of the
Certificate of Incorporation or Bylaws of the Seller; (c) violate any
judgment, decree, order or award of any court, governmental body or
arbitrator; or (d) except for the equipment leases set forth on Schedule
2.11(a) or any other instrument set forth on Schedule 2.2, conflict with or
result in the breach or termination of any term or provision of, or constitute
a default under, or cause any acceleration under, or cause the creation of any
lien, charge or encumbrance upon the properties or assets of the Seller
pursuant to, any indenture, mortgage, deed of trust or other instrument or
agreement to which any of them is a party or by which any of them or any of
their properties is or may be bound, other than with respect to obligations of
Seller which will be discharged at or prior to Closing. Schedule 2.2 attached
hereto sets forth a true, correct and complete list of all consents,
approvals, permissions, licenses, authorizations and other requirements
prescribed by law, rule, regulation or by contract in connection with the
consummation by the Seller of the transactions contemplated by this Agreement.
Except as indicated on Schedule 2.2, all such items have been or will be,
prior to the Closing Date, obtained and satisfied.
2.3 Ownership of the Assets. Schedule 2.3 attached hereto sets forth a
true, correct and complete list of all claims, liabilities, liens, pledges,
charges, encumbrances and equities of any kind affecting their respective
Assets (collectively, the "Encumbrances"). The Seller is, and at the Closing
will be, the true and lawful owner of the Assets, and will have the right to
sell and transfer to the Buyer (a) good, clear, record and marketable title to
the Real Estate and (b) good and marketable title to all Assets other than the
Real Estate, which at the Closing will be free and clear of all Encumbrances
except as otherwise set forth in Schedule 2.20(ii)
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with respect to Real Estate. The delivery to the Buyer of the instruments of
transfer of ownership contemplated by this Agreement will vest good, clear,
record and marketable title to the Real Estate and good and marketable title
to all Assets other than the Real Estate in the Buyer, free and clear of all
liens, mortgages, pledges, security interests, restrictions, prior
assignments, encumbrances and claims of any kind or nature whatsoever except
for the Permitted Exceptions (as hereinafter defined) as set forth on Schedule
2.20(ii).
2.3.5 Conveyed Assets. The Assets to be conveyed to the Buyer
hereunder constitute all properties, assets, rights and claims which are
necessary to the conduct of the Business as currently conducted by the Seller.
2.4 Financial Statements.
(a) The Seller has previously delivered to the Buyer its audited
balance sheet as of December 31, 1995 (the "December 1995 Balance Sheet") and
the related statements of operations, shareholders' equity and changes in
financial position of the Seller for the fiscal year then ended (collectively,
the "1995 Financial Statements") and will deliver prior to Closing its
unaudited balance sheet as of June 30, 1996 (the "June Balance Sheet") and the
related unaudited statements of operations, shareholders' equity and changes
in financial position of the Seller for the six (6) month period then ended
(the "Unaudited Financial Statements"). The 1995 Financial Statements, the
Unaudited Financial Statements and the Interim Financial Statements to be
delivered pursuant to Section 5.3 hereof (collectively, the "Financial
Statements"), have been (or will be) prepared in accordance with generally
accepted accounting principles applied consistently with past practice and
the Unaudited Financial Statements and the Interim Financial Statements, have
been (or will be) certified by the Seller's Chief Executive Officer.
(b) The 1995 Financial Statements are accurate and complete, and
fairly present, as of their respective dates, the financial condition,
retained earnings (deficit), assets and liabilities of the Seller and the
results of operations of the Seller's business for the periods indicated. The
June Balance Sheet fairly presents the assets and liabilities of the Seller
for the period indicated. Schedule 2.4(b) sets forth the revenue from
operations of the Seller for each of the six months in the period ended June
30, 1996.
2.5 Litigation. Except as otherwise set forth on Schedule 2.5, the
Seller is not a party to, or to the Selling Parties' best knowledge threatened
with, and none of the Assets are subject to, any litigation, suit, action,
investigation (to the best of the Selling Parties' knowledge), grievance,
arbitration, proceeding, or controversy or claim before any court,
administrative agency or other governmental authority relating to or affecting
the Assets or the business, properties, condition (financial or otherwise) or
prospects of the Business. The Seller is not in violation of or in default
with respect to any judgment, order, award, writ, injunction, decree or rule
of any court, governmental department, commission, agency, instrumentality,
arbitrator, administrative agency or governmental authority or any regulation
of any administrative agency or governmental authority, where such violation
or default would have a material adverse effect upon the Assets, the business,
properties, condition (financial or otherwise) or prospects of the Business or
the consummation of the transactions contemplated hereby. The Seller has not
received notice of any product liability claim, warranty claim or other claim
whatsoever which, if decided adversely, would have a material adverse effect
on
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the Assets or the business, condition (financial or otherwise), properties or
prospects of the Business.
2.6 Insurance. Schedule 2.6 sets forth a true, correct and complete
list of all fire, theft, casualty, general liability, workers compensation,
business interruption, environmental impairment, product liability, automobile
and other insurance policies insuring the Assets or business of the Business
and of all life insurance policies maintained for any employees of the
Business, specifying the type of coverage, the amount of coverage, the
premium, the insurer and the expiration date of each such policy
(collectively, the "Insurance Policies") and all claims made under such
Insurance Policies since January 1, 1993. True, correct and complete copies
of all of the Insurance Policies have been previously delivered by the Seller
to the Buyer. The Insurance Policies are in full force and effect and, in the
Seller's reasonable judgment, are in amounts and of a nature which are
adequate and customary for the business of the Business. All premiums due on
the Insurance Policies or renewals thereof have been paid and there is no
default under any of the Insurance Policies. Except as set forth on Schedule
2.6, the Seller has not received any notice or other communication from any
issuer of the Insurance Policies canceling or materially amending any of the
Insurance Policies, materially increasing any deductibles or retained amounts
thereunder, or materially increasing the annual or other premiums payable
thereunder, and, to the best knowledge of the Selling Parties, no such
cancellation, amendment or increase of deductibles, retainers or premiums is
threatened.
2.7 Inventory. Schedule 2.7 sets forth a true, correct and complete
list of the Inventory as of June 30, 1996, including a description and
valuation thereof. At the Closing Date, Buyer shall purchase the Inventory on
an "as is" basis.
2.8 Fixed Assets. Schedule 2.8 sets forth a true, correct and complete
list of all Fixed Assets as of the date hereof, including a description and
the cost and accumulated depreciation on an aggregate basis with respect to
all Fixed Assets. Except as set forth in Schedule 2.8, as of the Closing
Date, the Fixed Assets are in good condition and repair and are sufficiently
operational (apart from routine breakdowns in the ordinary course of business)
to enable the Buyer to conduct the business in essentially the same manner in
which it has heretofore been conducted by the Seller.
2.9 Leases. Schedule 2.9(a) attached hereto sets forth a true, correct
and complete list as of the date hereof of all leases of real estate,
identifying separately each ground lease, to which the Seller is a party as
lessee or tenant or which the Seller uses in the operations of the Business.
Schedule 2.9(b) attached hereto sets forth a list of all leases of real estate
which the Buyer will assume pursuant to this Agreement (the "Leases"). True,
correct and complete copies of the Leases, and all amendments, modifications
and supplemental agreements thereto, have previously been delivered by the
Seller to the Buyer. The Leases are in full force and effect, are binding and
enforceable against each of the parties thereto in accordance with their
respective terms and, except as set forth on Schedule 2.9(b) attached hereto,
have not been modified or amended since the date of delivery to the Buyer. No
party to any Lease has sent written notice to the other claiming that such
party is in default thereunder, which default remains uncured. Except as set
forth on Schedule 2.9(b) attached hereto, there has not occurred any event
which would constitute a breach of or default in the performance of any
material covenant, agreement or condition contained in any Lease by either
party thereto, nor
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has there occurred any event which with the passage of time or the giving of
notice or both would constitute such a breach or material default. The Seller
is not obligated to pay any leasing or brokerage commission relating to any
Lease and, except as set forth on Schedule 2.9(b) attached hereto, will not
have any enforceable obligation to pay any leasing or brokerage commission
upon the renewal or extension of any Lease. No material construction,
alteration or other leasehold improvement work with respect to any of the
Leases remains to be paid for or to be performed by any party under any Lease.
Seller has fulfilled all material obligations required pursuant to the Leases
to have been performed by Seller and has no reason to believe that it will be
unable to perform, when due, all of its remaining obligations under said
Leases after the date hereof to the Closing. None of the Leases imposes any
restrictions that would materially interfere with the continued operation of
the business as currently conducted on any of the properties that are the
subject of the Leases. There is no pending or, to the best of the Selling
Parties' knowledge, threatened eminent domain taking or condemnation that will
or may affect any of the properties that are the subject of the Leases.
2.10 Books and Records. The general ledgers and books of account of
the Seller with respect to the Business, all federal, state, local and foreign
income, franchise, property and other tax returns filed by the Seller, with
respect to the Assets, and all other books and records of the Seller with
respect to the Business are in all material respects complete and correct and
have been maintained in accordance with good business practice and in
accordance with all applicable procedures required by laws and regulations
other than any digression from such practice and procedures which has no
material and adverse effect on the Assets or the Business, or the valuations
thereof for the purposes of this Agreement, as conducted as of and prior to
the Closing Date.
2.11 Contracts and Commitments.
(a) Schedule 2.11(a) attached hereto contains a true, complete and
correct list and description of the following contracts and agreements,
whether written or oral, which relate to the Business:
(i) all material loan agreements, indentures, mortgages and
guaranties to which the Seller is a party or by which
the Seller or its property is bound;
(ii) all pledges, conditional sale or title retention
agreements, security agreements, equipment obligations,
personal property leases and lease purchase agreements
relating to any of the Assets to which the Seller is a
party or by which the Seller or any of its property is
bound;
(iii) all contracts, agreements, commitments, purchase orders
(other than merchandise deliveries to customers in the
normal course of business upon standard terms) or other
understandings or arrangements to which the Seller is a
party or by which any of their respective property is
bound which (A) involve payments or receipts by any of
them of more than $10,000 in the case of any single
contract, agreement, commitment, understanding or
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arrangement under which full performance (including
payment) has not been rendered by all parties thereto
or (B) may materially adversely affect the condition
(financial or otherwise) or the properties, Assets,
business or prospects of the Business;
(iv) all collective bargaining agreements, employment and
consulting agreements, non-competition agreements,
trust agreements, executive compensation plans, bonus,
401(k), or profit-sharing plans, deferred compensation
agreements, pension plans, retirement plans, employee
stock option or stock purchase plans and group life,
health and accident insurance and other employee
benefit plans, agreements, memoranda of understanding,
arrangements or commitments to which the Seller is a
party or by which the Seller or any of its property is
bound;
(v) all agency, distributor, sales representative and
similar agreements to which the Seller is a party;
(vi) all material contracts, agreements or other
understandings or arrangements, whether written or
oral, between the Seller and any shareholder, employee,
officer or director of the Seller which may affect the
Business as conducted as of and prior to the Closing
Date or the Assets;
(vii) all leases, whether operating, capital or otherwise,
under which the Seller is lessor or lessee;
(viii) all contracts, agreements and other documents or
information relating to past disposal of waste (whether
or not hazardous) which are available;
(ix) all return policies and product warranties relating to
products or goods manufactured or distributed by the
Business as the same are currently in effect or may
have been in effect from time to time since December
31, 1994, as well as any exception to such policies,
all cooperative advertising arrangements and all
rebate, discount or allowance arrangements;
(x) all contracts related to operation, maintenance or
management of the leased facilities under any Leases
(the "Leased Premises") other than immaterial contracts
which do not constitute a part of Assumed Liabilities;
and
(xi) any licensing agreements, franchise agreements and
other material agreement or contract entered into by
the Seller.
(b) Schedule 2.11(b) attached hereto sets forth a true, correct and
complete list of the contracts and agreements, whether written or oral, which
are to be assigned from
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the Seller to the Buyer at the Closing (collectively, the "Contracts"). Except
as set forth on Schedule 2.11(c) attached hereto:
(i) each Contract is a valid and binding agreement of the
Seller, enforceable against the Seller in accordance
with its terms, and the Selling Parties have no
knowledge that any Contract is not a valid and binding
agreement of the other parties thereto:
(ii) the Seller has fulfilled all material obligations
required pursuant to the Contracts to have been
performed by it prior to the date hereof, and the
Seller has no reason to believe that it will not be
able to fulfill, when due, all of its obligations under
the Contracts which remain to be performed after the
date hereof to the Closing;
(iii) the Seller is not in breach of or default under any
Contract, and no event has occurred which with the
passage of time or giving of notice or both would
constitute such a default, result in a loss of rights
or result in the creation of any lien, charge or
encumbrance, thereunder or pursuant thereto (an
"Inchoate Default"); and
(iv) to the best knowledge of the Selling Parties, there is
no existing breach or default by any other party to any
Contract, and no Inchoate Default.
(c) Except as set forth on Schedule 2.11(b), the continuation,
validity and effectiveness of each Contract would not be affected by the
transfer thereof to Buyer under this Agreement and all such Contracts are
assignable to Buyer without a consent.
(d) True, correct and complete copies of all of the foregoing
contracts and agreements (other than all unfilled purchase orders and all
unfilled customer orders), including but not limited to the Contracts, and a
list of all unfilled purchase orders and all unfilled customer orders, shall
be delivered by the Seller to the Buyer within five days of the date hereof
other than Contracts which will be terminated as of the Closing.
2.12 Compliance with Laws. The Seller has all requisite licenses,
permits and certificates, including health and safety permits, from federal,
state, local and foreign authorities necessary to conduct the Business and own
and operate the Assets (collectively, the "Permits"). Schedule 2.12 sets forth
a true, correct and complete list of all such Permits, copies of which
previously have been (or within five business days hereof will be) delivered
by the Seller to the Buyer. The Seller has not engaged in any activity which
would cause or, to the knowledge of the Seller, permit revocation or
suspension of any such Permit and no action or proceeding looking to or
contemplating the revocation or suspension of any such Permit is pending or
threatened. There are no existing defaults or Inchoate Defaults by the Seller
under any Permit. The Selling Parties have no knowledge of any default or
claimed or purported or alleged default or Inchoate Defaults on the part of
any party in the performance of any obligation to be performed or paid by any
party under any Permit. Except as set forth
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in Schedule 2.12, the consummation of the transactions contemplated by this
Agreement will in no way affect the continuation, validity or effectiveness of
the Permits or require the consent of any third party under any such Permit.
The Seller is not in violation of any law, regulation or ordinance (including
but not limited to laws, regulations or ordinances relating to building,
zoning, land use or similar matters) relating to its properties, the violation
of which could have a material adverse effect on the Assets or the business,
properties, condition (financial or otherwise) or prospects of the Seller.
The business of the Seller does not violate, in any material respect, and the
Seller is not in violation of, any federal, state, local or foreign laws,
regulations or orders, the violation or enforcement of which would have a
material and adverse effect on the Assets, business, properties, condition
(financial or otherwise) or prospects of the Seller. Except as set forth on
Schedule 2.12, the Seller has not received any notice or communication from
any federal, state, foreign, or local governmental or regulatory authority or
otherwise of any such violation or noncompliance and has not received any
notice prior to such time of any violation that has not been cured.
2.13 Employee Relations.
(a) The Seller is in compliance with all material federal, state,
local and foreign laws respecting employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged in any
unfair labor practice, and there are no arrears in the payment of wages or
taxes or workers compensation assessments or penalties.
(b) Except as set forth on Schedule 2.13:
(i) none of Seller's Employees are represented by any labor
union;
(ii) there is no unfair labor practice complaint against the
Seller pending before the National Labor Relations
Board or any state, foreign, or local agency affecting
the Seller;
(iii) there is no pending labor strike or other material
labor trouble affecting the Seller (including but not
limited to any organizational campaign);
(iv) there is no material labor grievance pending against or
affecting the Seller;
(v) there is no pending question concerning representation
respecting the Seller's Employees;
(vi) there are no pending arbitration proceedings arising
out of or under any collective bargaining agreement to
which the Seller is a party, or to the best knowledge
of the Seller, any basis for which a claim may be made
under any collective bargaining agreement to which the
Seller is a party affecting the Seller's Employees; and
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(vii) there is no pending litigation, or other proceeding or
basis for an unasserted claim against the Seller by any
employee or group of employees or independent
contractor or group of independent contractors which is
based on claims arising out of any employee's or group
of employees' employment relationship with the Seller
or any independent contractor's or group of independent
contractors' independent consulting relationship with
the Seller (insofar as such relationship pertains to
the business of the Seller), including but not limited
to claims for contract, tort, discrimination, employee
benefits, commissions, wrongful termination and any and
all common law or statutory claims.
(c) The Seller has previously provided the Buyer with a true,
correct and complete list of the Seller's current payroll.
2.14 Absence of Certain Changes or Events. Except as set forth on
Schedule 2.14 attached hereto, since December 31, 1995, the Seller has not
entered into any transaction which is not in the usual and ordinary course of
business, and, without limiting the generality of the foregoing, the Seller
has not:
(a) Mortgaged, pledged or subjected to lien, charge or other
encumbrance any of the Assets;
(b) Sold or purchased, assigned or transferred any of its
Intangible Property;
(c) Made any material amendment to or termination of any Contract
or done any act or omitted to do any act which would cause the breach of any
Contract;
(d) Suffered any casualty losses, whether insured or uninsured, and
whether or not in the control of the Seller, in excess of $25,000 in the
aggregate, or waived any rights of any value unless such loss or waiver is
reflected in the Financial Statements;
(e) Authorized or issued recall notices for any of its products
relating to the Business or initiated any safety investigations relating to
the Business; or
(f) Received notice of any litigation, warranty claim or products
liability claims relating to the Business.
2.15 Customers. The Seller has heretofore provided to the Buyer a true,
correct and complete list of the names and addresses of all customers of the
Seller. Except as otherwise disclosed in Schedule 2.15, none of the 15
customers which accounted for the largest dollar volume of purchases from the
Seller for the twelve month periods ended December 31, 1995 and June 30, 1996,
respectively, has notified the Seller that it intends to discontinue its
relationship with the Seller, nor to the best of the Selling Parties'
knowledge, relying solely upon inquiry of the Seller's executive officers,
does there exist any actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
the Seller with any such customer nor does there exist a present condition or
state of facts or circumstances known to the Seller involving such customers
which the Seller
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can now reasonably foresee would materially adversely affect the Business or
prevent the Buyer from conducting the Business after the consummation of the
transactions contemplated by this Agreement in essentially the same manner in
which it has heretofore been conducted by the Seller. The Seller has no
consignment sales in effect as of the Closing Date and no customer has any
return rights except as set forth on Schedule 2.11(a).
2.16 Suppliers. Schedule 2.16 sets forth a true, correct and complete
list of the names and addresses of the ten suppliers of the Seller which
accounted for the largest dollar volume of purchases by the Seller for the
twelve month periods ended December 31, 1995 and June 30, 1996, respectively.
The Seller is not a party to any requirements contract relating to the
purchase of inventory, finished goods or other property used in the conduct of
the Business. Except as otherwise disclosed in Schedule 2.16, none of the
Seller's suppliers has notified the Seller that it intends to discontinue its
relationship with the Seller, nor raise its prices so as to materially
adversely affect the Business nor, to the best of the Selling Parties'
knowledge, relying solely upon inquiry of the Seller's executive officers,
does there exist any actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship of
the Seller with any such supplier, nor does there exist a present condition or
state of facts or circumstances known to the Selling Parties involving such
suppliers which the Selling Parties can now reasonably foresee would
materially adversely affect the Business or prevent the Buyer from conducting
the Business after the consummation of the transactions contemplated by this
Agreement in essentially the same manner in which it has heretofore been
conducted by the Seller.
2.17 Prepayments and Deposits. The Seller has no prepayments or deposits
from customers for products to be shipped, or services to be performed, by the
Seller after the Closing Date.
2.18 Trade Names and Other Intangible Property.
(a) Schedule 2.18 attached hereto sets forth a true, correct and
complete list and, where appropriate, a description of, all Intangible
Property. True, correct and complete copies of all licenses and other
agreements relating to the Intangible Property have been previously delivered
by the Seller to the Buyer. The Selling Parties have no knowledge of any
default or claimed or purported or alleged default or state of facts which
with notice or lapse of time or both would constitute a default on the part of
any party in the performance of any obligation to be performed or paid by any
party under any such license or agreement. During the past five years the
only name by which the Seller has been known or which the Seller has used is
its corporate name set forth in the preamble of this Agreement.
(b) Except as otherwise disclosed in Schedule 2.18 attached hereto,
the Seller is the sole and exclusive owner, free and clear of all liens,
claims and restrictions, of all Intangible Property and all designs, permits,
labels and packages used on or in connection therewith. The Intangible
Property owned by the Seller is sufficient to conduct the Business, as
presently conducted. The Seller has received no notice of, and has no
knowledge of any basis for, a claim against it that any of its operations,
activities, products or publications infringes on any patent, trademark, trade
name, copyright or other property right of a third party, or that it is
illegally or otherwise using the trade secrets, formulae or any property
rights of others. Except as otherwise disclosed in Schedule 2.18, the Seller
(i) has no disputes
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with or claims against any third party for infringement by such third party of
any trade name or other Intangible Property of the Seller, and (ii) is not
obligated or under any liability whatsoever to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant
to, any patent, trademark, trade name, copyright or other property right, with
respect to the use thereof or in connection with the conduct of the Business
or otherwise. The Seller has taken all steps reasonably necessary to protect
its right, title and interest in and to the Intangible Property. Except as
set forth in Schedule 2.18 hereto, the consummation of the transactions
contemplated by this Agreement (including any required financing) will in no
way affect the continuation, validity or effectiveness of the Intangible
Property or require the consent of any third party in respect of the
Intangible Property.
2.19 Employee Benefit Plans.
(a) ERISA. Except as set forth on Schedule 2.19, neither the
Seller nor any person, firm, corporation or entity which is (or within the
past five years has been) a member with the Seller of a "controlled or
affiliated group", within the meaning of Section 414(b), (c), (m), (n) or (o)
of the Internal Revenue Code of 1986, as amended (the "Code"), has maintained,
sponsored or contributed to any "pension plan" within the meaning of Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any "welfare plan" within the meaning of Section 3(1) of ERISA, or
any other employee benefit plan, program, practice or arrangement, whether or
not subject to ERISA (a "non-ERISA plan") (such pension plans, welfare plans
and non-ERISA plans of the Seller being herein referred to as the "Employee
Plans"). Except as set forth on Schedule 2.19, the Seller has provided the
Buyer with a true, correct and complete copy of each pension plan, each
welfare plan and each non-ERISA plan listed on such Schedule, together with a
copy of the most recent summary plan description and annual report (if
applicable) with respect to each such plan. Except as set forth on Schedule
2.19, each pension plan listed on such Schedule is a "qualified plan" within
the meaning of Section 401 of the Code. Except as set forth on Schedule 2.19,
each pension plan, each welfare plan and each non-ERISA plan listed on such
Schedule has been administered in accordance with its terms, and each pension
plan and welfare plan has been operated and administered in accordance with
all applicable requirements of ERISA and the Code. Without limiting the
generality of the foregoing, no trustee, administrator, sponsor, or other
party-in-interest or disqualified person, has engaged or participated in any
"prohibited transaction", as that term is defined in Section 4975(c)(1) of the
Code, with respect to any pension plan or welfare plan listed on Schedule
2.19. Without limiting the generality of the foregoing, in connection with
all welfare or non-ERISA plans which are subject to continuation coverage
under Section 4980B of the Code, all notices and elections with respect to
such coverage have been made in compliance with the requirements of Section
4980B. With respect to each "defined benefit pension plan", as defined in
Section 3(35) of ERISA, identified on Schedule 2.19: (i) the fair market
value of the assets thereof as of the date hereof is as set forth on such
Schedule; (ii) the present value of all accrued benefits thereunder,
determined as if such pension plan terminated on the date hereof, is as set
forth on Schedule 2.19; (iii) if any such plan is a "multiemployer plan", as
defined in Section 3(37) of ERISA, the present value of the contingent
liability of the Seller both in the event of the termination of such plan and
in the event that the Seller withdraws therefrom is as set forth on Schedule
2.19; (iv) no such plan has incurred an "accumulated funding deficiency", as
such term is defined in Section 302 of ERISA, and (v) no such pension plan has
terminated, nor has
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any "reportable event", within the meaning of Section 4043 of ERISA, occurred
with respect to such plan. All contributions for all periods ending prior to
the Closing Date (including periods from the first day of the current plan
year to the Closing Date) will be made prior to the Closing Date by the Seller
in accordance with past practice with respect to pension plans, welfare plans
and non-ERISA plans. All insurance premiums (including premiums to the
Pension Benefit Guaranty Corporation) have been paid in full, subject only to
normal retrospective adjustments in the ordinary course of business, with
regard to applicable plans for policy years or other applicable policy periods
ending on or before the Closing Date.
(b) Claims and Litigation. Except as set forth on Schedule 2.19,
to the best of the Selling Parties' knowledge, there are no threatened or
pending claims, suits or other proceedings by present or former employees of
Seller, plan participants, beneficiaries or spouses of any of the above, the
Internal Revenue Service, the Pension Benefit Guaranty Corporation, or any
other pension or entity involving any Employee Plan, including claims against
the assets of any trust, involving any Employee Plan, or any rights or
benefits thereunder, other than ordinary and usual claims for benefits to
participants or beneficiaries, including claims pursuant to domestic relations
orders and there is no basis for any legal action, proceeding or investigation
with respect to such plans.
2.20 Real Estate.
(a) Schedule 2.20 contains a true, correct and complete list of
address, legal description and appraised value of all Real Estate. Schedule
2.20(i) sets forth a true, correct and complete list of all liabilities,
liens, encumbrances, easements, restrictions, reservations, tenancies,
agreements or other obligations affecting the Real Estate (collectively, the
"Exceptions"). The Seller has good, clear, record and marketable title to the
Real Estate, free and clear of all such Exceptions, other than the permitted
exceptions set forth on Schedule 2.20 (ii) (the "Permitted Exceptions").
(b) Except as set forth on Schedule 2.20, no work has been
performed on or materials supplied to the Real Estate within any applicable
statutory period which could give rise to mechanics or materialmen's liens;
all bills and claims for labor performed and materials furnished to or for the
benefit of the Real Estate for all periods prior to the Closing shall be paid
in full, and the Selling Parties have no knowledge of any mechanic's or
materialmen's liens, whether or not perfected, on or affecting any portion of
the Real Estate.
(c) There is no pending or threatened condemnation or eminent
domain proceeding with respect to the Real Estate or the Leased Premises.
(d) Except as set forth on Schedule 2.20, there are no taxes or
betterment or special assessments other than ordinary real estate taxes
pending or payable against the Real Estate or the Leased Premises and there
are no contingencies existing under which any assessment for real estate taxes
may be retroactively filed against the Real Estate or the Leased Premises; the
Selling Parties have no knowledge of any proposed special assessment that may
affect the Real Estate or the Leased Premises or any part thereof; there are
no penalties due with respect to real estate taxes and/or impositions, and all
real estate taxes and/or impositions (excepting those for the current year
that are not yet due and payable) with respect to the Real Estate or the
Leased Premises have been paid in full; there are no taxes or levies, permit
fees
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or connection fees which must be paid respecting existing curb cuts, sewer
hookups, water-main hookups or services of a like nature.
(e) The Real Estate to be acquired by the Buyer is legally
subdivided and consists of separate tax lots so that it is assessed separate
and apart from any other property.
(f) The Real Estate and the Leased Premises comply with the
requirements of all building, zoning, subdivision, health, safety,
environmental, pollution control, waste products, sewage control and all other
applicable statutes, laws, codes, ordinances, rules, orders, regulations and
decrees (collectively, the "Government Regulations") of any and all Government
Agencies. To the extent set forth in Schedule 2.12, the Seller has obtained
and provided to the Buyer all consents, permits, licenses and approvals
required by such Government Regulations, such consents, permits, licenses and
approvals are in full force and effect, have been properly and validly issued,
and on or prior to the Closing Date will be assigned to the Buyer by the
Seller to the extent the same are assignable. Except as set forth in Section
2.12, there is no uncured breach of any condition or requirement imposed by,
or pursuant to, any permit or license issued with respect to the Real Estate
or the Leased Premises. There is no action pending or, to the best of the
Selling Parties' knowledge, threatened by any Government Agencies claiming
that the Real Estate or the Leased Premises violates such Government
Regulations or threatening to shut down the Business or the use of the Assets
or to prevent the Assets from being used as presently used.
(g) Except as set forth on Schedule 2.20, there are no actions,
suits, petitions, notices or proceedings pending, given or, to the best of the
Seller's knowledge, threatened by any persons or Government Agencies before
any court, Government Agencies or instrumentalities, administrative or
otherwise, which if given, commenced or concluded would have a material
adverse effect on the value, occupancy, use or operation of the Real Estate or
the Leased Premises or an adverse effect on Buyer's title to the Real Estate.
Seller shall give Buyer prompt written notice of any such action, suit,
petition, notice or proceeding of which Seller obtains knowledge after the
date hereof and before the Closing Date.
(h) Each individual condominium unit, together with the applicable
appurtenant common element interest, if any, with respect thereto located on
the Real Estate is in good condition and repair, normal wear and tear
excepted, provided, however, that the ninth floor of such Real Estate shall be
accepted by the Buyer on an "as is" basis.
(i) Schedule 2.20 sets forth a true, correct and complete list of
all title insurance policies, site surveys, title reports, filings and
correspondence with Government Agencies relating to the Real Estate,
engineering studies and reports, hazardous waste reports, plots, plans,
surveys, soil tests and any other tests, test borings, or similar reports,
information and studies prepared with respect to the Real Estate which are in
the possession of the Seller, copies of which will be delivered by the Seller
to the Buyer within five business days of the date hereof.
(j) There are no agreements of sale (other than this Agreement),
options or other rights of third parties to acquire the Real Estate, and,
except as set forth on Schedule 2.20, no unrecorded easement, lease, claim,
restriction, covenant or encumbrance affecting all or any portion of the Real
Estate;
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(k) The Selling Parties (i) have not received notice and (ii) have
no knowledge of the existence of any outstanding notice:
(A) from any federal, state, county, municipal or foreign
authority alleging any health, safety, pollution, environmental, zoning or
other violation of law with respect to the Real Estate or the Leased Premises
or any part thereof that has not been entirely corrected; or
(B) from any insurance company or bonding company with respect
to any defects or inadequacies in the Real Estate or the Leased Premises or
any part thereof that would adversely affect the insurability of same or cause
the imposition of extraordinary premiums or charges therefor or any
termination or threatened termination of any policy of insurance or bond
relating thereto.
If the Selling Parties obtain knowledge of any such notice prior to the
Closing Date, the respective Selling Parties shall promptly notify Buyer
thereof.
(l) All costs arising from construction of any improvements and the
purchase of all equipment located on the Real Estate have been paid.
2.21 Bank Accounts; Securities; Other Assets. Set forth in Schedule 2.21
is a list of all bank accounts, safe deposit boxes, money market funds,
certificates of deposit, stocks, bonds, notes and other securities in the
names of or owned or controlled by the Seller except for those accounts at
_________________ under the name of ________________ to be used for receipt of
the proceeds of this transaction.
2.22 Disclosure. No representation or warranty by the Selling Parties in
this Agreement or in any Exhibit hereto, or in any list, statement, document
or information set forth in or attached to any Schedule delivered or to be
delivered pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements contained therein not misleading. The Selling
Parties have disclosed to the Buyer all material facts pertaining to the
transactions contemplated by this Agreement.
2.23 Brokers. Except for any broker's fee which may be owed by the
Seller to Steve West, and/or his affiliate, Internet Corporation Limited,
which broker's fee, if any, the Seller agrees to pay, all negotiations
relative to this Agreement and the transactions contemplated hereby have been
carried on by the Seller without the intervention of any other person in such
manner as to give rise to any valid claim for a finder's fee, brokerage
commission or other like payment.
2.24 Preservation of Assets. The Seller has not sold, assigned or
transferred any of the Assets, other than in the ordinary course of business,
or declared or paid any dividend or other distribution in respect of shares of
capital stock or made any purchase, redemption or other acquisition, directly
or indirectly, of any outstanding shares of its capital stock, since January
1, 1996.
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2.25 Environmental Compliance.
(a) The Seller has obtained all permits, licenses and other
authorizations required under Federal, state and local laws, relating to
protection of the Environment (as defined below), including laws relating to
any Release (as defined below) of or presence of pollutants, contaminants, or
hazardous or toxic materials or wastes into or in soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata, ambient
air, and/or any environmental medium (the "Environment") or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants or hazardous or toxic
materials or waste. Schedule 2.25 hereto sets forth a complete and accurate
list of all such permits, licenses and other authorizations obtained by the
Seller, copies of which have been delivered to the Buyer. The Seller is in
full compliance with all terms and conditions of such permits, licenses and
other authorizations. To the best of the Selling Parties' knowledge, except
as set forth on Schedule 2.25, there are no proposed or pending changes in the
federal, state, county or local laws, regulations, standards, or in the
Seller's permits, licenses or authorizations relating to pollution or
protection of the Environment that would increase the present costs of
compliance with such laws or change any methods of operation.
(b) Except as indicated on Schedule 2.25 neither the Seller has,
and, to the best of the Selling Parties' knowledge, after due inquiry, none of
the Seller's employees, agents, contractors or subcontractors have, used,
generated, processed, stored, transported, recycled, Released or otherwise
handled any Hazardous Materials (as defined below) except as permitted by law
on or about any real property related to the Seller's business or the Seller's
contractual relations with any such agents, contractors or subcontractors,
including, but not limited to, real property formerly owned by the Seller
(collectively, the "Seller Real Property") and the facilities now or formerly
leased or operated by the Seller (collectively, the "Seller Facilities").
Additionally, except as indicated on Schedule 2.25, neither the Seller
Facilities nor the Seller Real Property is being used or has ever previously
been used for the generation, use, processing, storage, transportation,
recycling, Release or handling of any Hazardous Materials, except as such use
may have been permitted by law. In addition, except as indicated on Schedule
2.25, neither the Seller Facilities nor the Seller Real Property has ever been
affected by any Hazardous Materials Contamination or Environmental Condition.
The Seller, in the conduct of its business, is and has been in compliance with
all Environmental Laws. Notwithstanding any statement or representation to
the contrary in any affidavit or other document, the Seller affirmatively
represents that as of the Closing Date, the Seller has made all filings
required by RCRA and that there have been no failures by the Seller to timely
report under CERCLA Section 103 or RCRA Section 304. The Seller has not
received any written notice from any governmental authority or any other
person respecting or related to any actual, threatened or potential Release or
presence of any Hazardous Materials or any non-compliance with any
Environmental Laws as to which any such claimed noncompliance presently
exists. Notwithstanding the preceding sentence, the Seller has not received
any notice from any governmental authority respecting noncompliance with RCRA.
No investigation, administrative proceeding, consent order or agreement,
limitation or settlement with respect to Hazardous Materials, Hazardous
Materials Contamination or Environmental Condition is, to the best of the
Selling Parties' knowledge, proposed, threatened, anticipated or in force with
respect to its business, nor has such property ever been on any Federal or
state "Superfund" or "Super Lien" list.
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As used in this Section 2.25, "due inquiry" shall mean that Selling
Parties have made inquiry of all of Seller's executives, corporate officers
and directors and any employee or agent of Seller with responsibility for
environmental matters.
As used herein "Hazardous Materials" include any (i) "Hazardous Waste" as
defined by The Resource Conservation and Recovery Act of 1976 (42 U.S.C.
Section 6901 et seq.), as amended from time to time ("RCRA"), and regulations
promulgated thereunder; and "Hazardous Substance" as defined by The
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(42 U.S.C. Section 9601 et seq.), as amended from time to time ("CERCLA"),
and regulations promulgated thereunder; (ii) asbestos; (iii) polychlorinated
biphenyls; (iv) any substance, the presence of which on the premises of the
Seller's business, is prohibited by applicable law; (v) oil, petroleum or any
petroleum products or by-products; (vi) any other substance which, according
to applicable law, requires special handling or notification of any Federal,
state or local governmental entity in its collection, processing, handling,
storage, transport, treatment or disposal or exposure thereto; (vii) any
substance, which if not properly disposed of, may pollute, contaminate, harm
or have any detrimental effect on the Environment; (viii) underground storage
tanks, whether empty, filled or partially filled with any substance; and (ix)
any other pollutant, toxic substance, hazardous substance, hazardous waste,
hazardous material or hazardous substance as regulated by or defined in or
pursuant to any Environmental law or any other Federal, state, or local
environmental law, regulation, ordinance, rule, or by-law, whether existing on
or prior to the date hereof.
As used herein, "Hazardous Materials Contamination" shall mean, with
respect to any premises, building or facilities or, the Environment,
contamination by a Release or the presence of Hazardous Materials.
As used herein, "Environmental Condition" shall mean any condition with
respect to the Environment on or off the Seller Real Property and Seller
Facilities, whether or not yet discovered, which could or does result in any
damage, loss, cost, expense, claim, demand, order, or liability to or against
the parties hereto by any third party (including, without limitation, any
government entity), including, without limitation, any condition resulting
from the operation of Seller's business.
As used herein, "Release" shall mean any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing.
As used herein, "Environmental Laws" shall mean any environmental or
health and/or safety-related law, regulation, rule, ordinance, or by-law at
the Federal, state, or local level, whether existing as of the date hereof,
previously enforced, or subsequently enacted, including but not limited to:
(i) Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,
42 USCA 9601 et seq.; (ii) Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976, as amended by the Hazardous
and Solid Waste Amendments of 1984, 42 USCA 6901 et seq.; (iii) Federal Water
Pollution Control Act of 1972 as amended by the Clean Water Act of 1977, as
amended, 33 USCA 1251 et seq.; (iv) Toxic Substances Control Act of 1976, as
amended, 15 USCA 2601 et seq.; (v) Emergency Planning and
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Community Right-to-Know Act of 1986, 42 USCA 11001 et seq.; (vi) Clean Air Act
of 1966, as amended by the Clean Air Act of 1986, as amended by the Clean Air
Act Amendments of l990, 42 USCA 7401 et seq.; (vii) National Environmental
Policy Act of 1970, as amended, 42 USCA 4321 et seq.; (viii) Rivers and
Harbors Act of 1970, as amended, 33 USCA 401 et seq.; (ix) Endangered Species
Act of 1973, as amended, 16 USCA 1531, et seq; (x) Occupational Safety and
Health Act of 1970, as amended, 29 USCA 651 et seq.; (xi) Safe Drinking Water
Act of 1974, as amended, 42 USCA 300 et seq., and any other federal, state, or
local law, regulation, rule, ordinance or order currently in existence which
governs:
(i) the existence, cleanup and/or remediation of toxic or
hazardous materials;
(ii) the Release, emission, discharge or presence of
Hazardous Materials into or in the Environment;
(iii) the control of Hazardous Materials; or
(iv) the use, generation, transport, treatment, storage,
disposal, removal or recovery of Hazardous Materials.
2.26 Purchase for Investment. The Selling Shareholders each represent
severally and not jointly that he is an "accredited investor", within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"1933 Act"), and is acquiring the Unidigital Stock for his own account, for
investment purposes only, and not with a view to the resale or distribution of
all or any part thereof. Each Selling Shareholder has not offered or sold any
portion of the Unidigital Stock and has no present plan or intention of
dividing such Unidigital Stock with others or reselling or otherwise disposing
of any portion of the Unidigital Stock, either currently or after the passage
of a fixed or determinable period of time, or upon the occurrence or
nonoccurrence of any predetermined event or circumstance. Each Selling
Shareholder agrees not to distribute or to transfer any of the Unidigital
Stock in the United States except in compliance with all applicable United
States federal and state securities laws. The Selling Shareholders further
recognize that the Unidigital Stock will not be registered under the 1933 Act
or the securities laws of any state, and the transfer of the same will be
restricted under such laws, and the Unidigital Stock cannot be sold except
pursuant to an effective registration statement under such laws or an
available exemption from such registration, and the certificates representing
the Unidigital Stock will bear a legend to such effect. Each Selling
Shareholder agrees not to distribute or to transfer any of the Unidigital
Stock within two years after the Closing Date.
2.27 Number of Employees. The number of employees employed by the Seller
as of the date hereof does not exceed 100.
2.28 Use of Proceeds Under Loan Agreement. All proceeds disbursed by RNB
to the Selling Parties pursuant to the Loan Agreement have been used by the
Selling Parties solely in connection with the operations of the Business.
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3. Representations of the Buyer and Unidigital
Representations and warranties made by the Buyer and Unidigital
herein or in any instrument or document furnished in connection herewith shall
survive the Closing until (and including) the fifth anniversary of the Closing
Date. The Buyer and Unidigital represent and warrant to the Seller as
follows:
3.1 Organization and Authority. Each of the Buyer and Unidigital is
duly organized and validly existing and in good standing under the laws of the
state of Delaware and has requisite power and authority to own its properties
and to carry on its business as now being conducted. Each of the Buyer and
Unidigital has full power to execute and deliver this Agreement and the
Instrument of Assumption and to consummate the transactions contemplated
hereby and thereby.
3.2 Authorization. The execution and delivery of this Agreement by the
Buyer and Unidigital and the agreements provided for herein to which each is a
party, and the consummation by the Buyer and Unidigital of all transactions
contemplated hereby, have been duly authorized by all requisite corporate
action. This Agreement and all such other agreements and written obligations
entered into and undertaken in connection with the transactions contemplated
hereby constitute the respective valid and legally binding obligations of the
Buyer and Unidigital, enforceable against them in accordance with their
respective terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors rights
generally. The execution, delivery and performance of this Agreement and the
agreements provided for herein, and the consummation by the Buyer and
Unidigital of the transactions contemplated hereby and thereby, will not, with
or without the giving of notice or the passage of time or both, (a) violate
the provisions of any law, rule or regulation applicable to the Buyer or
Unidigital; (b) violate the provisions of the organizational documents of the
Buyer or Unidigital; (c) violate any judgment, decree, order or award of any
court, governmental body or arbitrator applicable to the Buyer or Unidigital;
or (d) conflict with or result in the breach or termination of any term or
provision of, or constitute a default under, or cause any acceleration under,
or cause the creation of any lien, charge or encumbrance upon the properties
or assets of the Buyer or Unidigital pursuant to, any indenture, mortgage,
deed of trust or other agreement or instrument to which it or its properties
is a party or by which the Buyer or Unidigital is or may be bound. Schedule
3.2 attached hereto sets forth a true, correct and complete list of all
consents and approvals of third parties that are required of the Buyer and
Unidigital in connection with the consummation by the Buyer and Unidigital of
the transactions contemplated by this Agreement.
3.3 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by the Buyer and which are necessary for the
consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement have been, or will be prior to the Closing Date, obtained and
satisfied.
3.4 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Buyer and
Unidigital without the intervention
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of any other person in such manner as to give rise to any valid claim for a
finder's fee, brokerage commission or other like payment.
4. Access to Information; Public Announcements
4.1 Access to Management, Properties and Records.
(a) From the date of this Agreement until the Closing Date, the
Seller shall afford the officers, attorneys, accountants and other authorized
representatives of the Buyer free and full access upon reasonable notice
coordinated with the Chief Executive Officer or the Chief Financial Officer
and during normal business hours to all management personnel, offices,
properties, books and records of the Seller, so that the Buyer may have full
opportunity to make such investigation as it shall desire to make of the
management, business, properties and affairs of the Seller (provided that such
access is not unreasonably disruptive to the normal business operations of the
Seller), and the Buyer shall be permitted to make abstracts from, or copies
of, all such books and records. The Seller shall furnish to the Buyer such
financial and operating data and other information as to the Assets and the
Business as the Buyer shall reasonably request.
(b) If the Buyer, at its option and expense, prior to the Closing
Date, elects to have a report or reports prepared by an engineer or other
professional selected by the Buyer, certifying that the Real Estate (i)
complies in all material respects with all applicable building, health and
fire codes, and subdivision control laws, rules and regulations, and (ii)
contains structural, mechanical, electrical, HVAC and other building systems
the design and condition of which are reasonably satisfactory to Buyer, the
Seller shall cooperate with such engineer or professional to the extent
necessary to prepare such reports, including but not limited to providing such
engineer or professional access to the Real Estate and necessary records, and
arranging interviews with Seller's Employees.
(c) The Seller shall authorize the access of the Buyer to all files
pertaining to the Seller, the Assets or the Business or its operations held by
any federal, state, county or local or foreign authorities, agencies or
instrumentalities.
4.2 Confidentiality. All information not previously disclosed to the
public or not generally known to persons engaged in the business of the
Seller, Unidigital or the Buyer which shall have been furnished by the Buyer,
Unidigital or the Seller to the other party in connection with the
transactions contemplated hereby or as provided pursuant to this Section 4
shall not be disclosed by such receiving party to any person other than their
respective employees, directors, attorneys, accountants or financial advisors
or other than as contemplated herein. In the event that the transactions
contemplated by this Agreement shall not be consummated, all such information
which shall be in writing shall be returned to the party furnishing the same,
including, to the extent reasonably practicable, all copies or reproductions
thereof which may have been prepared, and neither party shall at any time
thereafter disclose to third parties, or use, directly or indirectly, for its
own benefit, any such information, written or oral, about the business of the
other party hereto.
4.3 Public Announcements. The parties will cooperate in the issuance of
any press releases or otherwise in the making of any public statements with
respect to the transactions
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contemplated hereby. The parties agree that prior to the Closing Date, all
public announcements or other public communications concerning this Agreement
and the purchase of the Assets by the Buyer shall be subject to the approval
of all parties hereto, which approval shall not be unreasonably withheld.
5. Pre-Closing Covenants of the Selling Parties
From and after the date hereof and until the Closing Date:
5.1 Conduct of Business. The Seller shall carry on the Business
diligently and shall not make or institute any unusual or new methods of
manufacture, purchase, sale, shipment or delivery, lease, management,
accounting or operation, and shall not ship or deliver any quantity of
products in excess of normal shipment or delivery levels, except as agreed to
in writing by the Buyer. All of the property of the Seller shall be used,
operated, repaired and maintained in a normal business manner consistent with
past practice.
5.2 Absence of Material Changes. Without the prior written consent of
the Buyer, the Seller shall not:
(a) Mortgage, pledge, or subject to any lien, charge or any other
encumbrance any of the Assets other than pursuant to the Loan Agreement which
lien, charge or encumbrance will be released prior to the Closing, and except
for statutory liens for amounts not yet due;
(b) Sell, assign, or transfer any of the Assets (except for
inventory sold in the ordinary course of business) or make, accrue or become
liable for any payment from the Assets in respect of any liability or
obligation of Seller not assigned by the Buyer pursuant to Section 1.3(a);
(c) Merge or consolidate with or into any corporation or other
entity;
(d) Make, accrue or become liable for any bonus, profit sharing or
incentive payment, except for accruals under existing plans, if any, or
increase the rate of compensation payable or to become payable by it to any of
its officers, or, except in accordance with past practice and the ordinary
course of business, its employees;
(e) Waive, forgive, release or compromise any rights of material
(individually or in the aggregate) value to the Business, including without
limitation any indebtedness owed to the Seller;
(f) Modify, amend, alter or terminate any of the Contracts except
for modifications, amendments, alterations or terminations which, individually
or in the aggregate, would not materially and adversely affect the Assets or
the Business;
(g) Take or omit to take any act constituting a breach or default
under any contract, indenture or agreement by which any of the Assets are
bound;
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(h) Fail to use best efforts to (i) preserve the possession,
control and good condition of the Assets and Business, (ii) keep in faithful
service its present officers and key employees, (iii) preserve the goodwill of
its customers, suppliers, agents, brokers and others having business relations
with it, and (iv) keep and preserve the Business existing on the date hereof
until after the Closing Date;
(i) Fail to operate the Business and maintain its books, accounts
and records in the customary manner and in accordance with past practice;
(j) Materially alter the terms, status or funding condition of any
Employee Plan except as contemplated by this Agreement;
(k) Enter into any collective bargaining contract, or any joint
venture, partnership or other arrangement for the conduct of the Business;
(l) Declare or pay any dividend or other distribution in respect of
shares of capital stock other than normal distributions for the payment of
income taxes occasioned by the Seller's subchapter S tax election;
(m) Make any purchase, redemption or other acquisition, directly or
indirectly, of any outstanding shares of its capital stock;
(n) Forgive, release or compromise any indebtedness owed to the
Seller by any employee or other person except upon full payment or, in the
case of any customer, returns and allowances made in the ordinary course of
business consistent with past practices;
(o) Purchase any assets or securities of any person, other than in
the ordinary course of business; or
(p) Commence any proceeding in bankruptcy or any other action
seeking reorganization, liquidation, dissolution, winding-up arrangement,
composition or readjustment of its debts or any other relief under any
bankruptcy, insolvency, reorganization or other similar act or law of any
jurisdiction now or hereafter in effect or make any other assignment for the
benefit of its creditors.
5.3 Delivery of Interim Financial Statements. As promptly as possible
following the last day of each month after the date hereof, and in any event
within 21 days after the end of each such month, the Seller shall deliver to
the Buyer its balance sheet and related statements of income, shareholders'
equity, retained earnings and changes in financial condition as of and for the
one-month period then ended and also on a fiscal year-to-date basis, all
certified by the Chief Executive Officer and accompanied by a review opinion
of the Seller's independent public accountants (collectively, the "Interim
Financial Statements").
5.4 Communication with Customers and Suppliers.
(a) The Seller will accept customer orders in the ordinary course
of business containing terms and margins consistent with past practice.
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(b) The Seller and the Buyer will cooperate in communication with
suppliers and customers to accomplish the transfer of the Assets to the Buyer
on the Closing Date, including without limitation, compliance with the
provisions of the New York Uniform Commercial Code, Article 6 (Bulk
Transfers).
5.5 Compliance with Laws. The Seller will comply with all laws and
regulations which are applicable to it, its ownership of the Assets or to the
conduct of the Business.
5.6 Continued Truth of Representations and Warranties of the Seller.
The Selling Parties will not take any actions which would result in any of the
representations or warranties set forth in Section 2 hereof being untrue in
any material respect.
5.7 Continuing Obligation to Inform. From time to time prior to the
Closing, the Selling Parties will deliver or cause to be delivered to the
Buyer supplemental information concerning events subsequent to the date hereof
which would render any statement, representation or warranty in this Agreement
or any information contained in any Schedule inaccurate or incomplete in any
material respect at any time after the date hereof until the Closing Date.
The Seller shall cooperate, and shall cause its employees to cooperate, with
the Buyer with respect to making available all information reasonably
requested by the Buyer.
5.8 Exclusive Dealing. The Seller will not, directly or indirectly,
through any officer, director, shareholder, agent or otherwise, present for
approval any other proposal for the acquisition, directly or indirectly, of
all or a substantial part of the Assets. The Seller shall promptly notify the
Buyer if any such proposal or offer is made. The obligations of the Seller
under this Section 5.8 shall terminate if at any time this Agreement shall be
terminable by Seller pursuant to Section 11.2 or Section 11.3(a) hereof.
5.9 No Taking or Acquisition. No part of the Real Estate shall have
been acquired by authority of any Governmental Agency in the exercise of its
power of eminent domain or by private purchase in lieu thereof, and there
shall be no threat or imminence of any such acquisition or purchase.
5.10 Government Approval of Sale. As soon as practical after the
execution of this Agreement, the Seller and the Buyer (and their respective
affiliates to the extent required by applicable law) shall make all filings
and submissions to any governmental agency which are required to be made in
connection with the transactions contemplated by this Agreement. Each party
shall furnish to the other such information and assistance as the other may
reasonably request in connection with the preparation of any such filing or
submission.
5.11 Delivery of Survey and Title Policy. Within five days after the
date hereof, the Seller shall deliver to the Buyer copies of the most recent
surveys and title policies with respect to the Real Estate.
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5A. Employee Matters
5A.1 Seller's Employees.
Seller has furnished to Buyer a list containing the names of all its
employees (hereinafter collectively called "Seller's Employees"), including
each such employee's status, social security number and current compensation.
If any such employee's employment is terminated or status changed prior to the
Closing Date, Seller shall promptly notify Buyer of such termination or status
change and, in the case of termination, if such employee is replaced, the
name, date of hire and compensation of the individual replacing such employee.
Future Changes. Nothing in this Section 5A shall require Buyer to
retain any of Seller's Employees, except for the Shareholders, for any period
of time after the Closing Date. Subject to requirements of applicable law,
Buyer reserves the right at any time after the Closing Date to terminate such
employment and amend, modify or terminate any term or condition of employment,
including without limitation, any employee benefit plan, program, policy,
practice or arrangement.
5A.2 Reporting of Data. Buyer and Seller shall compile and furnish to
each other such actuarial and employee data as shall be required from time to
time for each party to perform and fulfill its obligations under this Section.
5A.3 Pending Litigation. With respect to any litigation pending, or to
the knowledge of the Selling Parties threatened, as set forth in Schedule 2.19
hereto, which claim alleges violation of any nondiscrimination laws,
collective bargaining agreements, employment contract and termination thereof
or wage and hour laws, Seller shall fully defend such claim. Seller shall be
responsible for any monetary damages awarded in connection therewith. It is
understood by the parties that if Seller chooses to settle any matter relating
to any of the foregoing, including the terms and conditions thereof of any
back pay claims, such settlement shall be at the sole discretion of Seller and
Seller shall be solely responsible for the payment or performance of any such
settlement terms.
6. Best Efforts to Obtain Satisfaction of Conditions
The Selling Parties and the Buyer covenant and agree to use their
best efforts to obtain the satisfaction of the conditions specified in this
Agreement and to make any necessary modifications to carry out the intent of
this Agreement.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to the
fulfillment, at the Closing Date, of the following conditions precedent, each
of which may be waived in writing in the sole discretion of the Buyer:
7.1 Continued Truth of Representations and Warranties of the Selling
Parties: Compliance with Covenants and Obligations. The representations and
warranties of the Selling Parties shall be true in all material respects on
and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes
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permitted by the terms hereof or consented to in writing by the Buyer or
changes resulting solely from actions taken by the Buyer and there shall have
occurred no material adverse change in the business, assets, liabilities,
financial condition or operations of the Business. The Seller shall have
performed and complied in all material respects with all covenants required by
this Agreement to be performed or complied with by it prior to or at the
Closing Date.
7.2 Corporate Proceedings. All corporate and other proceedings required
to be taken on the part of the Seller to authorize or carry out this Agreement
and to convey, assign, transfer and deliver the Assets shall have been taken.
7.3 Other Governmental Approvals. All courts of law, governmental
agencies, departments, bureaus, commissions and similar bodies, the consent,
authorization or approval of which is necessary under any applicable law,
rule, order or regulation for the consummation by the Seller of the
transactions contemplated by this Agreement and the operation of the Seller's
business by the Buyer, shall have consented to, authorized, permitted or
approved such transactions including but not limited to, all clearance
certificates required pursuant to any applicable retail sales tax legislation
required in connection with the completion of the transactions contemplated
herein.
7.4 Assignment of Contracts and Permits. Seller shall execute and
deliver an Assignment of Leases substantially in the form attached hereto as
Exhibit D and an Assignment of Contracts and Permits substantially in the form
attached hereto as Exhibit E.
7.5 Consents of Lenders, Lessors and Other Third Parties. The Seller
shall have received the consents and approvals of all lenders, lessors and
other third parties whose consent or approval is required in order for the
Seller to consummate the transactions contemplated by this Agreement.
7.6 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Buyer to own or use the Assets after the Closing Date.
7.7 Opinion of Counsel. The Buyer shall have received an opinion of
Philip N. Rotgin, Esq., counsel to the Seller, dated as of the Closing Date,
substantially in the form attached hereto as Exhibit F (the "Opinion of
Seller's Counsel").
7.8 Board of Directors and Shareholder Approval. The directors and
shareholders of the Seller shall have duly authorized the transactions
contemplated by this Agreement.
7.9 The Assets. Except for the Permitted Exceptions, at the Closing the
Buyer shall receive good, clear, record and marketable title to the Real
Estate and (b) good and marketable title to all Assets other than the Real
Estate, free and clear of all liens, mortgages, pledges, security interests,
restrictions, prior assignments, encumbrances and claims of any kind or nature
whatsoever.
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7.10 Update. The Seller shall have provided the Buyer with a true,
correct and complete list and amount, as of the Closing Date, of:
(a) the Inventory;
(b) the Fixed Assets;
(c) the Accounts Receivable;
(d) the categories of each of the Assumed Liabilities;
(e) the Accounts Payable;
(f) the unfilled purchase orders;
(g) all unfilled customer orders; and
(h) all other categories of assets reflected on Exhibit G;
none of which information shall be materially and adversely different from the
information supplied by the Seller as of the date hereof on Schedules 2.7 and
2.8.
7.11 Environmental Reports; Compliance with Laws. The Buyer shall not
have received unsatisfactory environmental reports from its environmental
consultants and at any time prior to the Closing shall not have discovered
that any Real Estate or Leased Premises fails to comply in any material
respect with all applicable federal, foreign, state or local environmental,
zoning, land use, and wetlands laws, rules and regulations.
7.12 Fire, Casualty or Eminent Domain. If the Real Estate and/or any of
the other Assets are, prior to the Closing Date, either damaged by fire or
other casualty insured against or taken, in whole or in part, by eminent
domain proceedings, then the Buyer shall have the right to accept said Real
Estate and/or other Assets in their damaged or diminished condition together
with an assignment to Buyer of all insurance and/or condemnation proceeds
payable with respect to such fire, casualty or loss or terminate this
Agreement.
7.13 Due Diligence Review. The Buyer shall have completed a due
diligence review of the Business, the results of which review are reasonably
satisfactory to the Buyer. Such due diligence review shall include, without
limitation, review and acceptance of the disclosure Schedules to be attached
hereto at or prior to the Closing.
7.14 Non-Competition and Non-Disclosure Agreement. The Buyer and each of
Mark Darlow and Sheldon Darlow shall have entered into non-competition and
non-disclosure agreements in the form attached hereto as Exhibit H (the
"Non-Competition Agreements").
7.15 Employment Agreements. Each of Mark Darlow and Sheldon Darlow shall
have entered into Employment Agreements with the Buyer in the forms attached
hereto as Exhibits I-1 and I-2, respectively (the "Employment Agreements").
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7.16 Closing Deliveries. The Buyer shall have received at or prior to
the Closing each of the following documents:
(a) a bill of sale substantially in the form attached hereto as
Exhibit A, executed by the Seller;
(b) such instruments of conveyance, assignment and transfer, and
motor vehicle transfers and safety inspection certificates, if any, in form
and substance reasonably satisfactory to the Buyer, as shall be appropriate to
convey, transfer and assign to, and to vest in, the Buyer, good and marketable
title to the Assets other than the Intangible Property and the Real Estate;
(c) such instruments of conveyance, assignment and transfer in form
and substance reasonably satisfactory to the Buyer and in a form appropriate
to file, if required, with the United States Office of Patents and Trademarks,
sufficient to convey, transfer and assign to, and to vest in, the Buyer, good
and marketable title to the Intangible Property;
(d) such deeds and instruments of conveyance, assignment and
transfer, in form and substance reasonably satisfactory to the Buyer, as shall
be appropriate to convey, transfer and assign to, and to vest in, the Buyer,
good, clear, record, marketable and insurable title to the Real Estate,
subject only to the Permitted Exceptions;
(e) such instruments of conveyance, assignment and transfer, in
form and substance reasonably satisfactory to Buyer, as shall be appropriate
to convey, transfer and assign to, and to vest in, the Buyer, the Seller's
right, title and interest in and to all intangible personal property interests
comprising or necessary for the use of the Real Estate for the purposes
contemplated hereby, including but not limited to Seller's interest in (i) any
proceeds under any insurance policies or condemnation proceeds affecting any
portion of the Real Estate, (ii) all permits, variances and other governmental
approvals and consents (if any) relating to the Real Estate, and (iii) all
contracts and agreements affecting the Real Estate which Buyer elects to
assume in writing, free and clear of all liens and encumbrances;
(f) such instruments necessary for the operation and sale of all or
any portion of the Real Estate as a condominium, including, but not limited
to, a declaration of condominium, public offering statement, articles of
incorporation, by-laws and rules and regulations of a condominium association,
a management agreement, the contracts of sale and deed forms to be used in
connection with the sale and purchase of the Real Estate and all other
documents as required by Article 9-B of the New York Real Property Law and all
amendments, modifications or replacements thereof, or regulations with respect
thereto, now or hereafter enacted and otherwise, relating in whole or in part
to the imposition of a condominium regime upon the Real Estate or to the
regulation, management or administration of the condominium regime after such
imposition.
(g) all technical data, formulations, product literature and other
documentation relating to the Seller's business, all in form and substance
reasonably satisfactory to the Buyer;
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(h) such contracts, files and other data and documents pertaining
to the Assets or the Business as the Buyer may reasonably request;
(i) copies of the general ledgers and books of account of the
Seller related to the Business, and all federal, state, local and foreign
income, franchise, capital, property and other tax returns filed by the Seller
with respect to the Assets since January 1, 1995.
(j) such certificates of the Seller's officers and such other
documents evidencing satisfaction of the conditions specified in Section 7 as
the Buyer shall reasonably request;
(k) certificate of the Secretary of the Seller attesting to the
incumbency of the Seller's officers, respectively, and the authenticity of the
resolutions authorizing the transactions contemplated by the Agreement;
(l) estoppel certificates from each lessor under the Leases set
forth in Schedule 2.9(b) attached hereto (i) consenting to the assignment of
such Lease to the Buyer; (ii) representing that there are no outstanding
claims against the Seller under any such Lease, and no outstanding defaults or
events which, with the passage of time, may become defaults; (iii) specifying
the commencement and termination dates under the Lease; and (iv) providing
that any purchase right, purchase option, right of first refusal, renewal
right or other similar provision is enforceable by the Buyer and specifying
the rental rates under the Lease and any other matters that Buyer may
reasonably require;
(m) the schedules listed in Section 7.10;
(n) a certificate of the Seller stating that the Seller has not
received any notice of noncompliance with respect to any federal
environmental, occupational, workplace disclosure or right to know laws;
(o) a title policy or policies (together, the "Title Policy") from
one or more title companies reasonably acceptable to the Buyer (the "Title
Insurer"), in form and substance reasonably satisfactory to the Buyer covering
the Real Estate;
(p) such estoppel certificates as the Title Insurer may require in
order to issue the Title Policy, and such affidavits executed by the Seller as
the Title Insurer may reasonably require in order to omit from the Title
Policy all exceptions for (i) judgments or other returns against persons or
entitles whose names are the same as or similar to the Seller; (ii) all
parties in possession other than under rights to possession granted under the
Leases; and (iii) mechanics' liens;
(q) a survey of the Real Estate prepared by registered land
surveyors, adequate to cause the "survey exception" to be removed from, and
affirmative insurance regarding survey matters to be included in, the Title
Policy. Such survey, the cost of which shall be borne by the Buyer, shall
contain a certificate dated within 15 days of the Closing Date addressed to
Buyer and its title insurance company;
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(r) the originals, if in Seller's possession, of all building
permits, certificates of occupancy, and other governmental licenses, permits
and approvals, and all plans and specifications relating to the Real Estate
not previously delivered to the Buyer;
(s) the Employment Agreements executed by Mark Darlow and Sheldon
Darlow;
(t) the Non-Competition Agreements;
(u) the Opinion of Seller's Counsel;
(v) the Amendment of the Articles of Incorporation of the Seller to
discontinue the use of the name "Cardinal Communications Group, Inc." and to
file any instruments as may be necessary with any governmental authority to
change their corporate names and foreign qualifications;
(w) any and all forms required by the New York [Employment Security
Commission];
(x) the Escrow Agreement;
(y) such other documents, instruments or certificates as the Buyer
may reasonably request in order to evidence the accuracy of the Selling
Parties' representations or compliance by Seller with its covenants hereunder.
7.17 Seller's Employees. Seller shall use its good faith efforts in
order that certain of key technical and sales employees of the Seller shall
agree to employment by the Buyer effective as of the Closing Date on terms and
conditions reasonably satisfactory to the Buyer.
8. Conditions to Obligations of the Seller
The obligations of the Seller under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions precedent,
each of which may be waived in writing at the sole discretion of the Seller:
8.1 Continued Truth of Representations and Warranties of the Buyer and
Unidigital; Compliance with Covenants and Obligations. The representations
and warranties of the Buyer and Unidigital in this Agreement shall be true on
and as of the Closing Date as though such representations and warranties were
made on and as of such date, except for any changes consented to in writing by
the Seller. The Buyer and Unidigital shall have performed and complied with
all covenants required by this Agreement to be performed or complied with by
each of them prior to or at the Closing Date. In the event of any material
misrepresentation, the Buyer's primary remedy shall be to recoup economic
losses from the Selliing Parties prior to exercising any other remedies at law
or in equity.
8.2 Corporate Proceedings. All corporate, legal and other proceedings
required to be taken on the part of the Buyer and Unidigital to authorize or
carry out this Agreement shall have been taken.
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8.3 Approvals. All other governmental agencies, departments, bureaus,
commissions and similar bodies, the consent, authorization or approval of
which is necessary under any applicable law, rule, order or regulation for the
consummation by the Buyer and Unidigital of the transactions contemplated by
this Agreement shall have consented to, authorized, permitted or approved such
transactions.
8.4 Consents of Lenders, Lessors and Other Third Parties. The Buyer and
Unidigital shall have received all requisite and material consents and
approvals of all lenders, lessors and other third parties whose consent or
approval is required in order for the Buyer and Unidigital to consummate the
transactions contemplated by this Agreement, including but not limited to
those set forth on Schedule 3.2 attached hereto.
8.5 Adverse Proceedings. No action or proceeding by or before any court
or other governmental body shall have been instituted by any governmental body
or person whatsoever which shall seek to restrain, prohibit or invalidate the
transactions contemplated by this Agreement or which might affect the right of
the Seller to transfer the Assets or would affect the right of the Buyer to
acquire the Assets or for Unidigital to guarantee the obligations of the
Buyer.
8.6 Closing Deliveries. The Seller shall have received at or prior to
the Closing each of the following documents:
(a) such certificates of the Buyer's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
8 as the Seller shall reasonably request;
(b) a certificate of the Secretary of the Buyer attesting to the
incumbency of the Buyer's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement;
(c) such certificates of Unidigital's officers and such other
documents evidencing satisfaction of the conditions specified in this Section
8 as the Seller may reasonably request;
(d) a certificate of the Secretary of Unidigital attesting to the
incumbency of Unidigital's officers, the authenticity of the resolutions
authorizing the transactions contemplated by this Agreement;
(e) Instrument of Assumption executed by the Buyer and accepted by
the Seller;
(f) payment of the Purchase Price;
(g) the Non-Competition Agreement and the Employment Agreements,
executed by the Buyer;
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(h) a Guaranty substantially in the form attached hereto as Exhibit
J executed by Unidigital; and
(i) such other documents, instruments or certificates as the Seller
may reasonably request.
9. Post-Closing Agreements
The parties agree that from and after the Closing Date:
9.1 Proprietary Information.
(a) The Seller shall hold in confidence, and use its best efforts
to have all officers, shareholders, directors and personnel hold in
confidence, all knowledge and information of a secret or confidential nature
with respect to the Business, and shall not disclose, publish or make use of
the same without the consent of the Buyer, except to the extent that such
information shall have become public knowledge other than by breach of this
Agreement by the Seller or by any other persons who have agreed not to
disclose, publish or make use of such information.
(b) The Seller agrees that the remedy at law for any breach of this
Section 9.1 would be inadequate and that the Buyer shall be entitled to
injunctive relief in addition to any other remedy it may have upon breach of
any provision of this Section 9.1.
9.2 No Solicitation or Hiring of Former Employees. Except as provided
by law or with the written consent of Buyer, for a period of three years after
the Closing Date, the Seller and any persons or entities, that are not natural
persons, that directly or indirectly, through one or more intermediaries,
control, are controlled by, or are under common control with, the Seller (the
"Corporate Affiliates"), shall not solicit any person who was a Seller's
Employee on the Closing Date, and has been employed, and not terminated
without cause, by the Buyer or Unidigital, to terminate his employment with
the Buyer or Unidigital or to become an employee of the Seller or its
Corporate Affiliates or hire any person who was such an employee on the date
hereof or on the Closing Date to engage in, manage, operate, be connected with
or acquire any interest in, as an employee, consultant, advisor, agent, owner,
partner, co-venturer, principal director, shareholder, lender or otherwise,
any business competitive with the business of Seller, the Buyer or Unidigital
as conducted on the date hereof or on the Closing Date (a "Competitive
Business").
9.3 Non-Competition Agreement.
(a) For a period of five (5) years after the Closing Date, neither
the Seller nor any Corporate Affiliate thereof shall directly or indirectly
(i) manufacture, market or sell any product which has the same or
substantially the same function and primary application as any existing or
proposed product manufactured by the Seller on or prior to the Closing Date or
(ii) engage in, manage, operate, be connected with or acquire any interest in,
as an employee, consultant, advisor, agent, owner, partner, co-venturer,
principal, director, shareholder, lender or otherwise, any Competitive
Business, within a radius of one hundred (100) miles
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from each of the places in which the Seller, the Buyer or Unidigital conducted
business during the two years prior to the Closing Date.
(b) The parties hereto agree that the duration and geographic scope
of the non-competition provision set forth in this Section 9.3 are reasonable.
In the event that any court determines that the duration or the geographic
scope, or both, are unreasonable and that such provision is to that extent
unenforceable, the parties hereto agree that the provision shall remain in
full force and effect for the greatest time period and in the greatest area
that would not render it unenforceable. The parties intend that this
non-competition provision shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America and each and every political subdivision of each and every
country outside the United States of America where this provision is intended
to be effective. The Seller agrees that damages are an inadequate remedy for
any breach of this provision and that the Buyer shall, whether or not it is
pursuing any potential remedies at law, be entitled to equitable relief in the
form of preliminary and permanent injunctions without bond or other security
upon any actual or threatened breach of this non-competition provision. If
the Seller or any Corporate Affiliate shall violate this Section 9.3, the
duration of this Section 9.3 automatically shall be extended as against such
violating party for a period equal to the period during which such party shall
have been in violation of this Section 9.3. The covenants contained in this
Section 9.3 are deemed to be material and the Buyer is entering into this
Agreement relying on such covenants.
9.4 Sharing of Data. The Seller and/or its representatives shall have
the right for a period of seven years following the Closing Date to have
reasonable access to such books, records and accounts, including financial and
tax information, correspondence, production records, employment records and
other similar information as are transferred to the Buyer pursuant to the
terms of this Agreement for the limited purposes of concluding its involvement
in the business of the Seller prior to the Closing Date and for complying with
its obligations under applicable securities, tax, environmental, employment or
other laws and regulations. The Buyer shall have the right for a period of
seven years following the Closing Date to have reasonable access to those
books, records and accounts, including financial and tax information,
correspondence, production records, employment records and other records which
are retained by the Seller pursuant to the terms of this Agreement to the
extent that any of the foregoing relates to the Business transferred to the
Buyer hereunder or is otherwise needed by the Buyer in order to comply with
its obligations under applicable securities, tax, environmental, employment
or other laws and regulations.
9.5 Cooperation in Litigation. Each party hereto will fully cooperate
with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such
party relating to or arising out of the conduct of the Business prior to or
after the Closing Date (other than litigation arising out of the transactions
contemplated by this Agreement and except as otherwise expressly provided
herein). The party requesting such cooperation shall pay the out-of-pocket
expenses (including legal fees and disbursements) of the party providing such
cooperation and of its officers, directors, employees and agents reasonably
incurred in connection with providing such cooperation, but shall not be
responsible to reimburse the party providing such cooperation for such party's
time spent in such cooperation or the salaries or costs of fringe benefits or
similar expenses
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paid by the party providing such cooperation to its officers, directors,
employees and agents while assisting in the defense or prosecution of any such
litigation or proceeding.
9.6 Administration of Accounts Receivable and Accounts Payable.
(a) Except as otherwise provided for herein, the parties hereby
agree that, from and after the Closing Date, the parties shall be jointly
responsible for the administration of the Accounts Receivable and the Buyer
shall be solely responsible for the administration of the Accounts Payable.
The Selling Parties hereby agree to assist the Buyer, in good faith, in such
respects as the Buyer may reasonably request, in the Buyer's efforts to
collect the Accounts Receivable. Such assistance may include soliciting
account debtors and their billing representatives and taking other actions
consistent with the Seller's past collection practices, including, without
limitation, litigation; provided, however, that no litigation to collect any
Accounts Receivable shall be commenced by the Selling Parties without the
prior written consent of the Buyer, which consent shall not be unreasonably
withheld. It is understood and agreed that the Buyer shall pay the Accounts
Payable only out of the cash collected from the Accounts Receivable. To the
extent the amount of the Accounts Receivable collected (less any amounts
payable to the Buyer pursuant to Section 9.6(c) hereof) exceed the amount of
the Accounts Payable, such excess shall be paid to the Seller by the Buyer.
To the extent the amount of the Accounts Receivable collected is less than the
amount of the Accounts Payable, the Seller shall be solely responsible for the
payment of such shortfall.
(b) Notwithstanding the foregoing, Buyer hereby agrees to pay
Selling Parties' professional fees and [LIST OTHER PRIORITY CREDITORS], prior
to paying any other Accounts Payable then outstanding, provided, however, that
Buyer shall not be responsible for any payments owed to such creditors if the
Accounts Receivable collected are insufficient to make such payments.
(c) For a period of six months following the Closing Date, in the
event that sales of the Business are less than $500,000 in any given month,
the Buyer shall be entitled to retain Accounts Receivable collected for its
own account to the extent such sales of the Business are less than $500,000.
Such amounts shall be pro rated to account for any partial month. The parties
understand and agree that any Accounts Receivable collected by the Buyer shall
be used to satisfy any shortfall under this Section 9.6(c) before the payment
of any outstanding Accounts Payable under Sections 9.6(a) or (b). The parties
hereto agree that both Accounts Receivable and the Accounts Payable shall be
pro rated between the parties to determine pre-Closing and post-Closing
Accounts Receivable and Accounts Payable.
(d) Notwithstanding the preceding:
(i) If any account has been inactive for at least 90 days,
Seller can avail itself of any form of collection
without the consent of Buyer;
(ii) Regarding any active account, Buyer and Seller shall
use good faith in jointly determining the methods by
which Seller can collect Accounts Receivable; and
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(iii) Seller may compromise any Accounts Receivable without
obtaining Buyer's consent, but shall inform Buyer of
such compromise, as soon as reasonably practicable.
9.7 Sale of the Real Estate.
(a) In the event the Buyer sells, assigns, conveys or otherwise
transfers or enters into any contract to sell, assign, convey or otherwise
transfer, all or any portion of the Real Estate within five (5) years from the
Closing Date, Buyer shall distribute 50% of any profits earned on such
transfer to the Shareholders; provided, however, that Buyer shall have no
obligation to distribute any such profits to the Shareholders if, at the time
of such proposed distribution, the Buyer is operating at a net loss, as
determined in accordance with United States generally accepted accounting
principles, as in effect at the time of such proposed distribution.
(b) A profit shall be deemed to have been earned by Buyer on the
sale of such Real Estate if the purchase price paid to the Buyer for such Real
Estate (less expenses incurred by the Buyer in connection with such transfer)
exceeds the value assigned to such Real Estate as set forth on Schedule 2.20.
9.8 Earning Payments to the Shareholders. For a period of five (5)
years after the Closing Date, each of the Shareholders shall be entitled to
receive an annual bonus equal to 20% of the amount by which net income of the
Business exceeds $500,000 up to an amount not exceeding $1,500,000. Such
bonus shall be payable to the Shareholders prior to the 105th day after the
last day of each fiscal year and shall be apportioned as follows: (i) 50% of
such bonus shall be payable in Unidigital Stock and (ii) 50% of such bonus
shall be payable in cash.
9.9 Release of Personal Guaranties. The Buyer shall use its best
efforts to obtain the release of all personal guaranties of the Shareholders
of the indebtedness, leases and other obligations set forth on Schedule 9.9.
10. Indemnification and Reimbursement
10.1 Indemnification. The Selling Parties shall indemnify, defend and
hold harmless the Buyer and any parent, subsidiary or affiliate thereof and
all directors, officers, employees, agents and consultants of each of the
foregoing (collectively, the "Buyer Group") from and against all demands,
claims, actions or causes of action, assessments, losses, damages, liabilities
(whether absolute, accrued, contingent or otherwise), costs and expenses,
including but not limited to, interest, penalties and reasonable attorneys'
fees and expenses (collectively, "Damages"), asserted against, imposed upon or
incurred by the Buyer Group or any member thereof, directly or indirectly, by
reason of or resulting from or relating to any of the following (but in any
event excluding the Assumed Liabilities):
(a) liability and obligation of the Selling Parties;
(b) misrepresentation or breach of warranty or covenant or
agreement by the Selling Parties made or contained in this Agreement or in any
certificate or other instrument furnished or to be furnished to the Buyer
under this Agreement;
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(c) failure to comply with any bulk sales or similar laws
applicable to the transactions contemplated hereby; and
(d) litigation or other claim arising from acts, failures to act or
events which occurred prior to the Closing Date including, without limitation,
the remediation of environmental conditions attributable to the conduct of the
Business at the manufacturing facility in New York, New York prior to the
Closing Date and claims for product failure or defect (including but not
limited to claims for personal injury, property damages and breach of
warranty) which relate to any product manufactured or sold prior to the
Closing Date.
10.2 CERCLA. Nothing contained in this Agreement shall be deemed a
waiver of the right of the Buyer to maintain a private party cost recovery
action under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq.
10.3 Notice and Defense of Claims. The Seller's obligations and
liabilities hereunder with respect to claims resulting from the assertion of
liability by the Buyer or third parties shall be subject to the following
terms and conditions:
(a) Notice. The Buyer shall give prompt written notice to the
Seller of any claim or event known to it which does or may give rise to a
claim by the Buyer against the Seller for which the Buyer believes it is
entitled to indemnification pursuant to Section 10 of this Agreement, stating
the nature and basis of said claims or events and the amounts thereof, to the
extent known, and in the case of any claim, action, suit or proceeding brought
by any third party, a copy of any claim, process or legal pleadings with
respect thereto promptly after any such documents are received by the
indemnified party. Such notice shall be given in accordance with Section 13
hereof.
(b) Third Party Claims or Actions.
(i) In the event any claim, action, suit or proceeding is
made or brought by any third party against the Buyer,
with respect to which the Seller may have liability for
Damages under Section 10 of this Agreement, the Seller
shall, at its own expense, be entitled to participate
in and, to the extent that it shall wish, jointly and
with any other indemnifying party, to assume the
defense, with independent counsel reasonably
satisfactory to the Buyer, provided that in assuming
the defense of any such third party claim, action, suit
or proceeding, the Seller acknowledges in writing to
the Buyer that the Seller shall thereafter be liable
for any Damage with respect to such claim, action, suit
or proceeding.
(ii) If the Seller elects to assume control of such defense
or settlement, it shall conduct such defense or
settlement in a manner reasonably satisfactory and
effective to protect the Buyer fully; such company and
its counsel will keep the Buyer fully
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advised as to its conduct of such defense or
settlement, and no compromise or settlement shall be
agreed or made without the written consent of the
Buyer, which consent shall not be unreasonably
withheld. In any case, the Buyer shall have the right
to employ its own counsel and such counsel may
participate in such action, but the fees and expenses
of such counsel shall be at the expense of the Buyer,
when and as incurred, unless (A) the employment of
counsel by the Buyer has been authorized in writing by
the Seller, (B) the Buyer shall have reasonably
concluded that there may be a conflict of interest
between the Seller and the Buyer in the conduct of the
defense of such action, (C) the Seller shall not in
fact have employed independent counsel reasonably
satisfactory to the Buyer to assume the defense of such
action and shall have been so notified by the Buyer,
(D) the Buyer shall have reasonably concluded and
specifically notified the Seller either that there may
be specific defenses available to it which are
different from or additional to those available to it
or that such claim, action, suit or proceeding involves
or could have a material adverse effect upon it beyond
the financial resources of the Seller or the scope of
this Agreement, or (E) the Seller fails to conduct such
defense or settlement in a manner reasonably
satisfactory to protect the Buyer fully. If clause
(B), (C), (D) or (E) of the preceding sentence shall be
applicable, then counsel for the Buyer shall have the
right to direct the defense of such claim, action, suit
or proceeding on behalf of the Buyer and the reasonable
fees and disbursements of such counsel shall constitute
Damages hereunder.
(iii) If the Seller does not elect to assume the defense of
any such claim, or if it fails to conduct said defense
or settlement in a manner reasonably satisfactory to
protect the Buyer fully, the Buyer may engage
independent counsel selected by the Buyer to assume the
defense and may contest, pay, settle or compromise any
such claim on such terms and conditions as the
indemnified party may determine. The reasonable fees
and disbursements of such counsel shall constitute
Damages hereunder.
(iv) The Buyer and the Seller, as the case may be, shall be
kept fully informed of such claim, action, suit or
proceeding at all stages thereof whether or not such
party is represented by its own counsel.
10.4 Cooperation. The parties hereto agree to render to each other such
assistance as they may reasonably require of each other and to cooperate in
good faith with each other in order to ensure the proper and adequate defense
of any claim, action, suit or proceeding brought by any third party. Where
counsel has been selected by the Seller or by the Buyer
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pursuant to Section 10.3, the Seller or the Buyer, as the case may be, shall
be entitled to rely upon the advice of such counsel in the conduct of the
defense.
10.5 Confidentiality. The parties agree to cooperate in such a manner as
to preserve in full the confidentiality of all confidential business records
and the attorney-client and work-product privileges. In connection therewith,
each party agrees that (a) it will use its best efforts, in any action, suit
or proceeding in which it has assumed or participated in the defense, to avoid
production of confidential business records and (b) all communications between
any party hereto and counsel responsible for or participating in the defense
of any action, suit or proceeding shall, to the extent possible, be made so as
to preserve any applicable attorney-client or work-product privilege.
11. Termination of Agreement
11.1 Termination by Lapse of Time. This Agreement shall terminate if the
transactions contemplated hereby have not been consummated by 5:00 p.m.,
Eastern standard time, on August 9, 1996, unless such date is extended by the
written consent of all of the parties hereto.
11.2 Termination by Agreement of the Parties. This Agreement may be
terminated by the mutual written agreement of the parties hereto. In the
event of such termination by agreement, the Buyer shall have no further
obligation or liability to the Seller under this Agreement and the Seller
shall have no further obligation or liability to the Buyer under this
Agreement.
11.3 Termination by Reason of Breach.
(a) This Agreement may be terminated by the Seller if at any time
prior to the Closing there shall occur (i) a material breach of any of the
representations, warranties or covenants of the Buyer contained in Section 3,
(ii) the material failure by the Buyer to perform any condition or obligation
contained in Sections 8.1, 8.2, or 8.6, or (iii) the failure of the Buyer to
use its best efforts to perform the conditions or obligations contained in
Sections 8.3, 8.4, or 8.5.
(b) This Agreement may be terminated by the Buyer if at any time
prior to the Closing there shall occur (i) a material breach of any of the
representations, warranties, covenants or obligations of the Seller contained
in Sections 2 or 5, (ii) the material failure of the Seller to perform any
condition or any obligation contained in Sections 7.1, 7.2, 7.7, 7.8, 7.9,
7.10, 7.13 or 7.14 or (iii) the failure of the Seller to use its best efforts
to perform the conditions or obligations contained in Sections 7.3, 7.4 or
7.5.
(c) This Agreement may be terminated by the Seller if at any time
prior to the Closing there shall occur any failure of any condition or
obligation contained in Section 11.3(a)(iii) above which the Buyer has used
its best efforts to satisfy, and may be terminated by the Buyer if at any time
prior to the Closing there shall occur any failure of any condition or
obligation enumerated in Section 11.3(b)(iii) above which the Seller has used
its best efforts to satisfy, at any time that satisfaction of such condition
is required.
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12. Transfer and Sales Tax
The Buyer shall be responsible for and pay all filing and recording
taxes and fees, and all sales, use and transfer taxes and fees, if any, upon
the sale and transfer of the Assets hereunder.
13. Notices
Any notices or other communications required or permitted hereunder
shall be sufficiently given if in writing (including telecommunications) and
delivered personally or sent by telex, telecopy or other wire transmission
(with request for assurance in a manner typical with respect to communications
of that type), federal express or other overnight air courier (postage
prepaid), registered or certified mail (postage prepaid with return receipt
requested), addressed as follows or to such other address of which the parties
may have given notice:
To the Seller: Cardinal Communications Group, Inc.
545 West 45th Street
New York, New York 10036
Attn: Mr. Mark Darlow
Tel. No.: (212) 489-1717
Fax No.: (212) 313-1849
With a copy to: Philip N. Rotgin, P.C.
The Empire State Building
350 Fifth Avenue
Suite 5402
New York, New York 10118
Attn: Philip N. Rotgin, Esq.
Tel. No.: (212) 239-7550
Fax No.: (212) 465-2341
To the Buyer: Unidigital Inc.
20 West 20th Street
New York, New York 10011
Attn: Mr. William E. Dye
Tel. No.: (212) 337-0330
Fax No.: (212) 727-3151
With a copy to: Buchanan Ingersoll
500 College Road East
Princeton, New Jersey 08540
Attn: David J. Sorin, Esq.
Tel. No.: (609) 987-6801
Fax No.: (609) 520-0360
Unless otherwise specified herein, such notices or other communications shall
be deemed received (a) on the date delivered, if delivered personally or by
wire transmission; (b) on the
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next business day after mailing or deposit with an overnight air courier; or
(c) five business days after being sent, if sent by registered or certified
mail.
14. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. Neither the
Seller nor the Buyer may assign all or a portion of its rights and obligations
hereunder without the prior written consent of the other party, except that
the Buyer may assign all or a portion of its rights and obligations hereunder
to an Affiliate of Buyer, provided that Buyer shall remain liable for the
performance of the Buyer's obligations under this Agreement. Any assignment
in contravention of this provision shall be void.
15. Entire Agreement; Amendments; Attachments
(a) This Agreement, all Schedules and Exhibits hereto, and all
agreements and instruments to be delivered by the parties pursuant hereto
represent the entire understanding and agreement between the parties hereto
with respect to the subject matter hereof and supersede all prior oral and
written and all contemporaneous oral negotiations, commitments and
understandings between such parties except as expressly provided herein. The
Buyer and the Seller, by the consent of their respective Boards of Directors,
or officers authorized by such Boards, may amend or modify this Agreement, in
such manner as may be agreed upon, by a written instrument executed by the
Buyer and the Seller.
(b) If the provisions of any Schedule or Exhibit to this Agreement
are inconsistent with the provisions of this Agreement, the provisions of the
Agreement shall prevail. The Exhibits and Schedules attached hereto or to be
attached hereafter are hereby incorporated as integral parts of this
Agreement.
16. Expenses
Except as otherwise expressly provided herein, the Buyer and the
Seller shall each pay their own expenses in connection with this Agreement and
the transactions contemplated hereby.
17. Legal Fees
In the event that legal proceedings are commenced by the Buyer
against the Seller, or by the Seller against the Buyer, in connection with
this Agreement or the transactions contemplated hereby, the party or parties
which do not prevail in such proceedings shall pay the reasonable attorneys'
fees and other costs and expenses, including investigation costs, incurred by
the prevailing party in such proceedings.
18. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to conflicts of laws
rules or principles.
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19. Section Headings
The section headings are for the convenience of the parties and in
no way alter, modify, amend, limit, or restrict the contractual obligations of
the parties.
20. Severability
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
21. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which shall be one and the
same document.
22. Currency
Unless otherwise indicated, all dollar amounts referred to in this
Agreement are in United States funds.
23. Ambiguity in Drafting
Each party shall have been deemed to have participated equally in
the drafting of this Agreement and the agreements contemplated hereby and any
ambiguity in any such contracts shall not be construed against any purported
author thereof.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of and on the date first above written.
(Corporate Seal) SELLER:
ATTEST: CARDINAL COMMUNICATIONS GROUP, INC.
By: /s/ Sheldon Darlow
- ---------------------- -----------------------------
Secretary Name: Sheldon Darlow
Title: President
ATTEST: C-MAX GRAPHICS, INC.
By: /s/ Mark Darlow
- ---------------------- -----------------------------
Secretary Name: Mark Darlow
Title: President
BUYER:
ATTEST: UNIDIGITAL/CARDINAL CORPORATION
By: /s/ William E. Dye
- ---------------------- -----------------------------
Secretary Name: William E. Dye
Title: President
ATTEST: UNIDIGITAL INC.
By: /s/ William E. Dye
- ---------------------- -----------------------------
Secretary Name: William E. Dye
Title: President and Chief Executive Officer
SHAREHOLDERS:
/s/ Mark Darlow
--------------------------------
Mark Darlow
/s/ Sheldon Darlow
--------------------------------
Sheldon Darlow
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' BASIC TERMS OF EMPLOYMENT AGREEMENTS
<TABLE>
<CAPTION>
Mark Darlow Sheldon Darlow
----------- ---------------
<S> <C> <C>
Term 5 years 2 years
Salary $160,000 - minimum CPI increase for $104,000 - minimum CPI increase for
NY/Metro Area, plus possible other NY/Metro Area, plus possible
increases - discretionary other increases - discretionary
Certain Fringe Benefits $750/mo. car allowance -------
Health Insurance Health Insurance
Vacation 4 weeks 4 weeks
Other Benefits Same as other Senior Mgmt. Same as other Senior Mgmt.
</TABLE>
